Considering both the keynesian and the aggregate demand-supply frameworks, if households as a group experience an increase in wealth at a given price level, then the te curve shifts the ad curve shifts and real gdp

upward; rightward; increases

Explanation: Consumption expenditure is spending by households and individuals on durable goods, nondurable goods, and services. Durable goods are things that last and provide value over time, such as automobiles. Nondurable goods are things like groceries—once you consume them, they are gone. Services are intangible things consumers buy, like healthcare or entertainment.

Keynes identified three factors that affect consumption:

Disposable income: For most people, the single most powerful determinant of how much they consume is how much income they have in their take-home pay. This left-over income is also also known as disposable income, which is income after taxes.

Expected future income: Consumer expectations about future income also are important in determining consumption. If consumers feel optimistic about the future, they are more likely to spend and increase overall aggregate demand. News of recession and troubles in the economy will make them pull back on consumption.

Wealth or credit: When households experience a rise in wealth, they may be willing to consume a higher share of their income and to save less. When the US stock market rose dramatically in the late 1990s, for example, US rates of saving declined, probably in part because people felt that their wealth had increased and there was less need to save. How do people spend beyond their income when they perceive their wealth increasing? The answer is borrowing. On the other side, when the US stock market declined about 40% from March 2008 to March 2009, people felt far greater uncertainty about their economic future, so rates of saving increased while consumption declined.

Finally, Keynes noted that a variety of other factors combine to determine how much people save and spend. If household preferences about saving shift in a way that encourages consumption rather than saving, then aggregate demand will shift out to the right. Optimism about the economy will increase consumption and shift the AD curve to the right, while widespread pessimism dampens consumer spending and shifts the AD curve to the left. You can probably think of other factors that will shift the AD curve because they impact consumption independent of the price level. When a country's GDP is high it means that the country is increasing the amount of production that is taking place in the economy and the citizens have a higher income and hence are spending more. There is an increase in the lifestyle of the citizens and there are more individuals going to college.

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