If consumption changes because of a change in a factor other than the price level,then the
A) economy moves from one point on an AD curve to another point on the same curve.
B) AD curve shifts.
C) economy moves from one point on a short-run aggregate supply (SRAS)curve to another point on the same curve.
D) SRAS curve shifts.
E) none of the above

Question

Quizplus · Accepted Answer

A change in a factor other than the price level that affects consumption (e.g. changes in government spending, taxes, or consumer confidence) would cause the aggregate demand (AD) curve to shift, as it will change the overall quantity of goods and services demanded at each price level. The economy would move to a new equilibrium point on the new AD curve.

If Consumption Changes Because of a Change in a Factor