Figure 9.1 shows three aggregate demand curves. A movement from curve AD0 to curve AD1 could be caused by a(n)
A) decrease in the money supply.
B) decrease in taxes.
C) decrease in the price level.
D) decrease in government spending.

Question

Figure 9.1 shows three aggregate demand curves. A movement from curve AD0 to curve AD1 could be caused by a(n) 
A) decrease in the money supply.
B) decrease in taxes.
C) decrease in the price level.
D) decrease in government spending.

Quizplus · Accepted Answer

A movement from AD0 to AD1, which represents an increase in aggregate demand, could be caused by a decrease in taxes. This is because lower taxes increase consumers' disposable income, leading to higher spending and thus shifting the aggregate demand curve to the right.

Figure 91 Shows Three Aggregate Demand Curves