Refer to Figure 18.1.Which of the following would most likely cause a shift from AD₃ to AD₂? A)An increase in transfer payments because of a recession. B)An increase in the reserve ratio. C)A decrease in the discount rate. D)An increase in taxes.

Question

Quizplus · Accepted Answer

A decrease in disposable income due to an increase in taxes would lead to a decrease in consumption and shift the aggregate demand curve to the left, from AD₃ to AD₂. The other options presented would have a different effect on the aggregate demand curve.