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The aggregate demand curve in the figure above shifts rightward if
A)taxes are cut.
B)government expenditure decreases.
C)the money wage rate falls.
D)potential GDP increases.
E)the Federal Reserve raises the interest rate.

Question

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The aggregate demand curve in the figure above shifts rightward if
A)taxes are cut. 
B)government expenditure decreases. 
C)the money wage rate falls. 
D)potential GDP increases. 
E)the Federal Reserve raises the interest rate.

Quizplus · Accepted Answer

A cut in taxes increases consumers' disposable income, leading to higher consumption and thus shifting the aggregate demand curve to the right.

- The Aggregate Demand Curve in the Figure Above Shifts Rightward