Refer to Figure 16.1. -Refer to Figure 16.1.A shift from AD₁ to AD₂ could be caused by: A) A decrease in government spending. B) An increase in the money supply. C) An increase in taxes. D) An increase in the incentives to save.

Question

Quizplus · Accepted Answer

A shift from AD₁ to AD₂ represents an increase in aggregate demand, which could be caused by an increase in the money supply. Option A suggests a decrease in government spending, which would shift the aggregate demand curve to the left, not right. Option C, an increase in taxes, would also shift the aggregate demand curve to the left. Option D, an increase in incentives to save, would affect the savings-investment spending balance and not necessarily lead to an increase in aggregate demand.