Which of the following would cause the AD curve to shift to the right?
A)An increase in the real rate of interest
B)A decrease in government purchases
C)An increase in government purchases
D)An increase in the rate of inflation
E)A decrease in the rate of inflation

Question

Quizplus · Accepted Answer

An increase in government purchases would increase aggregate demand, causing the AD curve to shift to the right, since there would be more spending in the economy. An increase in the real rate of interest would decrease aggregate demand, causing the AD curve to shift to the left, since people and firms would be less likely to borrow and spend. A decrease in government purchases, a decrease in the rate of inflation, and an increase in the rate of inflation would all have a mixed effect on aggregate demand, depending on other factors that are not specified.

Which of the Following Would Cause the AD Curve to Shift