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    Aggregate expenditure function transformation

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    Explain how the aggregate expenditure function shifts in response to changes in each of the following variables:

    a. The real interest rate increases.
    b. Consumer confidence decreases.
    c. Higher taxes are imposed on business profits.
    d. The economies of many countries in the rest of the world go into recessions.

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    Solution Summary

    This provides examples of how the aggregate expenditure function is affected by variables.