Which of the following increases aggregate demand and shifts the AD curve rightward?
A) an increase in the quantity of money and a resulting fall in the interest rate
B) an increase in the exchange rate that makes imports less expensive
C) a fall in the price level
D) predictions of a recession that lead to expectations of lower future income

Question

Quizplus · Accepted Answer

An increase in the quantity of money leads to a fall in interest rates, which encourages borrowing and spending, thereby increasing consumption and investment. This leads to an increase in aggregate demand and a rightward shift of the AD curve.

Option B is incorrect as a rise in the exchange rate makes imports more expensive, which reduces consumption and decreases aggregate demand, shifting the AD curve leftward.

Option C is also incorrect because a fall in the price level leads to a decrease in aggregate demand and a leftward shift of the AD curve.

Option D is incorrect as pessimistic expectations lead to a decrease in consumption and investment spending, decreasing aggregate demand and shifting the AD curve leftward.

Which of the Following Increases Aggregate Demand and Shifts the AD