ECONOMICS
AGGREGATE DEMAND
|
Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
|
|
|
a decrease in the quantity of money
|
|
|
an increase in government purchases of goods and services
|
|
|
a decrease in taxes
|
|
|
a decrease in interest rates
|
|
|
an increase in government transfers
|
Detailed explanation-1: -A decrease in the quantity of money raises the interest rate, since people now want to borrow more and lend less. A higher interest rate reduces investment and consumer spending at any given aggregate price level, so the aggregate demand curve shifts to the left.
Detailed explanation-2: -Option A) The policy of the government that will increase the personal income taxes will cause AD to decrease and shift parallelly to the left. This is because the rise in income taxes will cause the disposable income (Yd) of the consumers to fall.
Detailed explanation-3: -The aggregate supply curve shifts to the left as the price of key inputs rises, making a combination of lower output, higher unemployment, and higher inflation possible.
Detailed explanation-4: -The tax cut, by increasing consumption, shifts the AD curve to the right.
Detailed explanation-5: -If the government raises taxes, aggregate demand shifts left.