Figure 13-2 shows shifts in the aggregate demand curve. Which of the following combinations would be illustrated by a shift in aggregate demand from AD₀ to AD₁?Figure 13-2 A)A slow increase in government purchases combined with a large decrease in investment B)An increase in consumption combined with an increase in exports C)An increase in business tax rates combined with a decrease in consumer confidence D)An increase in the growth rates of a major trading partner combined with a severe slowdown in stock market wealth E)An increase in exports combined with an even larger increase in imports

Question

Quizplus · Accepted Answer

An increase in aggregate demand from AD₀ to AD₁ is shown as a shift to the right of the aggregate demand curve. This indicates an increase in overall demand in the economy. Option B shows an increase in consumption and exports, both of which are components of aggregate demand. Therefore, an increase in aggregate demand from AD₀ to AD₁ can be illustrated by an increase in consumption combined with an increase in exports.

Figure 13-2 Shows Shifts in the Aggregate Demand Curve