Which of the following would cause the AD curve to shift to the left?
A)A decrease in the real rate of interest
B)A decrease in the rate of inflation
C)An increase in government purchases
D)A decision by the Fed to decrease the nominal interest rate
E)None of these

Question

Quizplus · Accepted Answer

None of the options provided would cause the aggregate demand (AD) curve to shift to the left. A decrease in the real rate of interest (A) and a decision by the Fed to decrease the nominal interest rate (D) would both likely increase aggregate demand by making borrowing cheaper, thus shifting the AD curve to the right. A decrease in the rate of inflation (B) could increase real purchasing power, potentially increasing consumption and shifting the AD curve to the right. An increase in government purchases (C) directly increases aggregate demand, also shifting the AD curve to the right.

Which of the Following Would Cause the AD Curve to Shift