ECONOMICS
AGGREGATE DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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shift the short-run aggregate supply curve to the left.
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shift the aggregate demand curve to the right.
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shift the short-run aggregate supply curve to the right.
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shift the aggregate demand curve to the left.
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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: -Because a rise in confidence is associated with higher consumption and investment demand, it will lead to an outward shift in the AD curve, and a move of the equilibrium, from E0 to E1, to a higher quantity of output and a higher price level, as shown in Figure 1 (a).
Detailed explanation-3: -When demand increases amid constant supply, consumers compete for the goods available and, therefore, pay higher prices. This dynamic induces firms to increase output to sell more goods. The resulting supply increase causes prices to normalize and output to remain elevated.
Detailed explanation-4: -The aggregate supply curve shifts to the right as productivity increases or the price of key inputs falls, making a combination of lower inflation, higher output, and lower unemployment possible.