Figure 7-6 -Refer to Figure 7-6. Suppose the economy is initially in short-run equilibrium at B. A shift from AD₁ to AD₂ could have been caused by all of the following except A) an increase in consumer optimism. B) economic prosperity in foreign economies. C) a personal income tax cut. D) an increase in the price level from P_a to P_b.

Question

Quizplus · Accepted Answer

Option D is incorrect because an increase in the price level from P_a to P_b would cause a shift from AD₁ to AD₀, not AD₂. Options A, B, and C are all possible causes of the shift from AD₁ to AD₂.

Figure 7-6 -Refer to Figure 7-6. Suppose the Economy Is Initially in Is