The figure above shows aggregate demand curves.
-Based on the figure above, the aggregate demand curve will shift from AD₀ to AD₁ when
A)potential GDP increases.
B)the price level falls.
C)the price level rises.
D)government expenditure decreases.
E)the Federal Reserve lowers the interest rate.

Question

The figure above shows aggregate demand curves.
-Based on the figure above, the aggregate demand curve will shift from AD₀ to AD₁ when
A)potential GDP increases. 
B)the price level falls. 
C)the price level rises. 
D)government expenditure decreases. 
E)the Federal Reserve lowers the interest rate.

Quizplus · Accepted Answer

A decrease in interest rates by the Federal Reserve typically increases investment and consumption, leading to a rightward shift in the aggregate demand curve from AD₀ to AD₁.

The Figure Above Shows Aggregate Demand Curves