ECONOMICS
AGGREGATE DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Price Level decreased, or government expenditures increased
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Price Level decreases, or government instituted a tax credit
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Government expenditures or the money supply increased
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None of the above
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Detailed explanation-1: -The aggregate demand curve shifts to the right as the components of aggregate demand-consumption spending, investment spending, government spending, and spending on exports minus imports-rise. The AD curve will shift back to the left as these components fall.
Detailed explanation-2: -Increased government spending is likely to cause a rise in aggregate demand (AD). This can lead to higher growth in the short-term. It can also potentially lead to inflation.
Detailed explanation-3: -When the Fed increases the money supply, it lowers the interest rate and increases the quantity of goods and services demanded at any given price level, shifting aggregate-demand to the right.
Detailed explanation-4: -An increase in any of the components of aggregate demand – consumption spending, investment spending, government spending, and net exports (X-M) – shifts the aggregate demand curve to the right, and a fall in any of these components shifts it to the left. A shift from AD to AD1 reflects an increase in aggregate demand.
Detailed explanation-5: -ANS: The increase in expenditures means that government spending rises. The aggregate demand curve shifts to the right.