Use the following to answer questions: -(Figure: AD-AS) Refer to Figure: AD-AS. Suppose that the economy is initially at E₁, where AD₁intersects SRAS₁ and LRAS. Now, suppose that the AD₁shifts to AD_2.That shift could be due to a(n): A) increase in the aggregate price level. B) decrease in government expenditure. C) increase in tax rates. D) increase in money supply.

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A shift in the AD curve from ADS1U1B11S1U1B0 to ADS1U1B12 could be due to an increase in the money supply, which stimulates spending and shifts the AD curve to the right. A decrease in government expenditure or an increase in tax rates would decrease AD and shift the curve to the left. An increase in the aggregate price level would move the economy upward along the AD curve, but would not shift the curve itself.

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