ECONOMICS
AGGREGATE DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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An inwards shift of the AD
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An outwards shift of the AD
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An outwards shift of the AS
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An outwards shift of the AS
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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: -Policymakers can influence aggregate demand with fiscal policy. An increase in government purchases or a cut in taxes shifts the aggregate-demand curve to the right. A decrease in government purchases or an increase in taxes shifts the aggregate-demand curve to the left.
Detailed explanation-3: -Fiscal policy affects aggregate demand through changes in government spending and taxation. Those factors influence employment and household income, which then impact consumer spending and investment.
Detailed explanation-4: -Expansionary fiscal policy occurs when the Congress acts to cut tax rates or increase government spending, shifting the aggregate demand curve to the right.