ECONOMICS
AGGREGATE DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A reduction in income tax
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A reduction in interest rates
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An increase in government spending
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A fall in the cost of production
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Detailed explanation-1: -A change in inflation changes the level of prices in the economy and thereby cause a movement along the AD curve rather than a shift. Therefore, the correct option is D, an increase in inflation.
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: -A change in the price level does not shift the aggregate demand curve. It simply represents a movement along the curve, because there is an inverse relationship between the price level and aggregate quantity demanded.
Detailed explanation-4: -Answer and Explanation: The correct option is: d. Changes in production technology.