-Refer to Exhibit 8-3.A shift in aggregate demand from AD₁ to AD₂ could have been the result of A) a decrease in the price level. B) an increase in the price level. C) a decrease in interest rates (which was not prompted by a change in the price level). D) an increase in interest rates (which was not prompted by a change in the price level).

Question

Quizplus · Accepted Answer

A shift in aggregate demand from one level to another, such as described, could be caused by a decrease in interest rates. Lower interest rates reduce the cost of borrowing, encouraging consumers and businesses to spend more, which increases aggregate demand. This shift is not directly related to a change in the price level but rather to the cost of borrowing and investment.