Which of the following events will cause the largest rightward shift (as measured horizontally) of the AD curve?
A) A 15% decrease in the aggregate price level.
B) A 15% decrease in the nominal wage.
C) A tax increase.
D) A 15% increase in the nominal money supply.
E) A decrease in government spending.

Question

Quizplus · Accepted Answer

A 15% increase in the nominal money supply will cause the largest rightward shift of the AD curve because it directly increases consumer and investment spending, resulting in a higher demand for goods and services. A decrease in the aggregate price level (A), nominal wage (B), and government spending (E) will also shift the AD curve rightward, but to a lesser extent than an increase in the nominal money supply. A tax increase (C) will shift the AD curve leftward, so it is not a valid option.

Which of the Following Events Will Cause the Largest Rightward