Which set of changes will definitely shift the aggregate demand (AD)curve to the right?
A) Business taxes decline and foreign real national income rises.
B) Businesses become pessimistic about future sales and the U.S.dollar depreciates.
C) Wealth increases and individuals expect higher (future)incomes.
D) a and b
E) a and c

Question

Quizplus · Accepted Answer

A decline in business taxes will increase business investment and consumer spending, leading to an increase in aggregate demand. An increase in foreign real national income will increase demand for exports and thus also shift the aggregate demand curve to the right. An increase in wealth and higher future income expectations will increase consumer confidence and spending, further increasing aggregate demand. Therefore, options A and C are correct, and the correct answer is E. Option B will shift the aggregate demand curve to the left due to decreased consumer and business confidence and decreased demand for American goods and services caused by the depreciation of the U.S. dollar.

Which Set of Changes Will Definitely Shift the Aggregate Demand