Aggregate demand will shift to the RIGHT if:
A) the aggregate price level increases.
B) government purchases increase.
C) taxes go up.
D) the money supply shrinks.

Question

Quizplus · Accepted Answer

An increase in government purchases will increase aggregate demand, shifting it to the right. Option A is incorrect because an increase in the aggregate price level (inflation) would lead to a decrease in aggregate demand, shifting it left. Option C is incorrect because an increase in taxes would decrease disposable income, leading to a decrease in consumption and a leftward shift of aggregate demand. Option D is incorrect because a decrease in the money supply would lead to an increase in interest rates, decreasing investment and consumption and shifting aggregate demand left.

Aggregate Demand Will Shift to the RIGHT If