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

Question

Quizplus · Accepted Answer

A movement from point b to point c represents an increase in the quantity of goods and services demanded at any given price level. This suggests that there has been a decrease in the price level, which would shift the aggregate demand curve to the right from AD2 to AD3. An increase in the money supply (choice A) or a decrease in taxes (choice B) would also shift the aggregate demand curve to the right, but this would result in a movement from point a to b rather than from b to c. A decrease in government spending (choice D) would shift the aggregate demand curve to the left, causing a movement from point b to a. Therefore, choice C is the correct answer.

Figure 91 Shows Three Aggregate Demand Curves