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

Question

Quizplus · Accepted Answer

A movement from point b to point a along the aggregate demand curve suggests a decrease in real GDP and price level. This can occur due to an increase in the general price level. So, among the given choices, the only one that can lead to an increase in the general price level is an increase in the general price level itself, which is represented by choice C. Thus, a movement from point b to point a could be caused by an increase in the price level.

Figure 91 Shows Three Aggregate Demand Curves