Use the following to answer questions:
Figure: AD-AS Model II
-(Figure: AD-AS Model II) Refer to Figure: AD-AS Model II. If the value of household wealth increases, the _____ curve will shift to the _____.
A) SRAS; left
B) SRAS; right
C) AD; right
D) AD; left

Question

Use the following to answer questions:
Figure: AD-AS Model II 
-(Figure: AD-AS Model II) Refer to Figure: AD-AS Model II. If the value of household wealth increases, the _____ curve will shift to the _____.
A) SRAS; left 
B) SRAS; right 
C) AD; right 
D) AD; left

Quizplus · Accepted Answer

An increase in household wealth will lead to an increase in consumption, which is a component of aggregate demand. Therefore, the AD curve will shift to the right. There is no reason for the SRAS curve to shift in response to an increase in household wealth.

Use the Following to Answer Questions