ECONOMICS
AGGREGATE DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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an increase on import spending
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an increase in autonomous consumer spending
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an increase in interest rates
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a decrease in the money supply
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a decrease in the overall price level of the economy
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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: -If households become more optimistic about their future incomes, the aggregate demand curve will shift to the right. when the price level falls, the real value of household wealth rises, and so will consumption.
Detailed explanation-3: -Three different factors that can shift the aggregate demand curve to the left are decrease in government expenditure, decrease in money supply and increase in tax rates.
Detailed explanation-4: -Hence, an increase in net exports would result in an increase in the aggregate demand of the economy. As a result, the aggregate demand curve would also shift to the right. Thus, option D is the correct answer.
Detailed explanation-5: -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.