Arrange the following statements when autonomous investment increases.
(A) The autonomous expenditure increases.
(B) Aggregate demand and output have a multiplier effect.
(C) Income and output increases.
(D) The aggregate demand curve shifts parallel upward.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → (A), (D), (C), (B)
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(A) The autonomous expenditure increases — because investment is a component of autonomous expenditure.
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(D) The aggregate demand curve shifts parallel upward — higher expenditure increases overall demand at all income levels.
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(C) Income and output increase — producers respond to higher demand by increasing production.
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(B) Aggregate demand and output have a multiplier effect — the initial rise in expenditure leads to further rounds of spending, amplifying the total increase in income and output.