An increase in investment caused by a factor other than a change in the price level
A) shifts the AD curve to the right.
B) shifts the AD curve to the left.
C) causes an upward movement along the existing AD curve.
D) causes a downward movement along the existing AD curve.
E) none of the above

Question

Quizplus · Accepted Answer

An increase in investment shifts the AD (Aggregate Demand) curve to the right, as it reflects an increase in the demand for goods and services in the economy, irrespective of the price level. This is because the investment increases employment, production, and incomes, creating a multiplier effect that leads to a sequential increase in consumption, exports, and taxes. As a result, the AD curve shifts to the right to signify the higher level of equilibrium output and price level that can be sustained in the economy. Therefore, choice A is the best answer.

An Increase in Investment Caused by a Factor Other Than