Which of the following pairs is correctly matched?

The correct answer is Option (3) → Rise in autonomous investment – the AD line shifts upwards in parallel

A change in autonomous spending A moves the AD line up or down in parallel. A change in the MPC changes its slope, so the line swings.

Option (1) Rise in the mps – the AD line swings upwards and becomes steeper — Incorrect. A higher MPS means a lower MPC, so the AD line becomes flatter and swings downwards.

Option (2) Fall in the mpc – the AD line shifts downwards in parallel — Incorrect. A change in the MPC swings the line; it does not shift it in parallel.

Option (3) Rise in autonomous investment – the AD line shifts upwards in parallel — Correct. Investment is part of A, so the line moves up without a change in slope.

Option (4) Rise in autonomous consumption – the AD line swings upwards and becomes steeper — Incorrect. Autonomous consumption is also part of A, so the line shifts up in parallel.