Figure: The Multiplier Planned aggregate spending, AEPlanned (billions of dollars) $4,000 (a) Change in Income- Expenditure Equilibrium GDP AEPlanned E2 AEPlanned, 3,500 3,000 2,400 2,000 E 1,200 800 0 Aggregate price level P* $500 1,000 1,500 2,000 2,500 3,000 3,500 4,000 Y Y (b) Shift of the AD Curve Real GDP (billions of dollars) E2 E AD1: AD2 Y2 Real GDP 2000 1,000 1,000 2,000 2,000 3,000 3,000 4,000 Aggregate price level (b) Shift of the AD Curve E2 E AD AD (billions of dollars) Real GDP Refer to Figure: The Multiplier. If this economy is at Y 1 and the price level decreases: a. an upward movement along the AD1 will take place, reflecting an increase in the price level. Ob. AD1 will shift to the left, reflecting a multiplied decrease in re GDP at every price level. c. a downward movement along the AD will take place, reflecting a decrease in the price level. d. AD will shift to the right, reflecting a multiplied increase in real GDP at every price level