The figure above shows the aggregate demand curve.
-The aggregate demand curve in the figure above shifts rightward if
A)potential GDP increases.
B)the money wage rate falls.
C)taxes are hiked.
D)government expenditure decreases.
E)the expected future profit increases so that investment increases.

Question

The figure above shows the aggregate demand curve.
-The aggregate demand curve in the figure above shifts rightward if
A)potential GDP increases. 
B)the money wage rate falls. 
C)taxes are hiked. 
D)government expenditure decreases. 
E)the expected future profit increases so that investment increases.

Quizplus · Accepted Answer

The aggregate demand curve shifts rightward when there is an increase in expected future profits, which leads to an increase in investment. This is shown as a movement along the curve to a higher GDP level. The other options would shift the aggregate demand curve leftward.

The Figure Above Shows the Aggregate Demand Curve