ECONOMICS
AGGREGATE DEMAND
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
cause a movement along a given AD curve.
|
|
|
shift the AD curve to the right
|
|
|
shift the AD curve to the left
|
|
|
None of the above
|
Detailed explanation-1: -Changes in the Money Supply The Fed can shift the aggregate demand curve when it changes monetary policy. An increase in the money supply shifts the money supply curve to the right. Without a change in the money demand curve, the interest rate falls.
Detailed explanation-2: -The aggregate demand curve, or AD 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-3: -An expansionary monetary policy will reduce interest rates and stimulate investment and consumption spending, causing the original aggregate demand curve (AD0) to shift right to AD1, so that the new equilibrium (Ep) occurs at the potential GDP level of 700.
Detailed explanation-4: -Shifting the Aggregate Demand Curve The aggregate demand curve tends to shift to the left when total consumer spending declines. 2 Consumers might spend less because the cost of living is rising or because government taxes have increased.