Figure 24-1

-Refer to Figure 24-1.Ceteris paribus,an increase in the growth rate of domestic GDP relative to the growth rate of foreign GDP would be represented by a movement from
A) AD₁ to AD₂.
B) AD₂ to AD₁.
C) point A to point B.
D) point B to point A.

Question

Figure 24-1
 
-Refer to Figure 24-1.Ceteris paribus,an increase in the growth rate of domestic GDP relative to the growth rate of foreign GDP would be represented by a movement from
A) AD₁ to AD₂. 
B) AD₂ to AD₁. 
C) point A to point B. 
D) point B to point A.

Quizplus · Accepted Answer

An increase in the growth rate of domestic GDP relative to the growth rate of foreign GDP would increase the demand for domestic goods and services, thereby increasing aggregate demand. This would be represented by a shift of the AD curve to the right from AD₁ to AD₂. Therefore, the correct choice is B.

Figure 24-1 -Refer to Figure 24-1.Ceteris Paribus,an Increase in the Growth Rate