Figure 8-2

-Refer to Figure 8-2.Which of the following a shift in aggregate demand from AD₀ to AD₁ illustrate?
A)a decrease in consumption, combined with an increase in export
B)an increase in business tax rates, combined with a decrease in consumer confidence
C)faster growth rates by a major trading partner, combined with an increase in stock market wealth
D)an increase in government purchases, combined with a decrease in investment

Question

Figure 8-2
 
-Refer to Figure 8-2.Which of the following a shift in aggregate demand from AD₀ to AD₁ illustrate?
A)a decrease in consumption, combined with an increase in export 
B)an increase in business tax rates, combined with a decrease in consumer confidence 
C)faster growth rates by a major trading partner, combined with an increase in stock market wealth 
D)an increase in government purchases, combined with a decrease in investment

Quizplus · Accepted Answer

A shift in aggregate demand from AD₀ to AD₁ indicates an increase in overall demand for goods and services in the economy. This could be caused by a variety of factors, but options A, B, and D all involve decreases in demand for goods and services and therefore would not cause a shift to the right in the aggregate demand curve. Option C, however, includes a faster growth rate by a major trading partner and an increase in stock market wealth, both of which would increase demand for goods and services and therefore cause a shift in aggregate demand to the right from AD₀ to AD₁.

Figure 8-2 -Refer to Figure 8-2.Which of the Following a Shift in Following