Which of the following would cause an increase in aggregate demand in the short run?
A) an increase in the supply of money
B) a decrease in the price level
C) an increase in taxes
D) a crop failure

Question

Quizplus · Accepted Answer

An increase in the supply of money would result in lower interest rates, which would encourage borrowing and spending, increasing aggregate demand.

Answer: D
 A crop failure would result in a decrease in supply and an increase in prices, leading to inflation. This would increase aggregate demand in the short run as people spend more on the higher-priced goods.

Which of the Following Would Cause an Increase in Aggregate