Which combination of factors would most likely increase aggregate demand?
A) An increase in household indebtedness and a decrease in net exports
B) An increase in consumer wealth and a decrease in interest rates
C) An increase in personal taxes and a decrease in government spending
D) An increase in business taxes and a decrease in profit expectations

Question

Quizplus · Accepted Answer

An increase in consumer wealth would lead to an increase in spending, which raises aggregate demand. A decrease in interest rates would spur investment spending and consumption spending, both of which increase aggregate demand. The other choices would likely decrease aggregate demand as they either reduce consumer spending power (A), or reduce overall spending in the economy (C and D).

Which Combination of Factors Would Most Likely Increase Aggregate Demand