Which set of events would lead to an increase in a country's aggregate demand?
A) The country's CPI falls while its currency appreciates.
B) The country's inflation rate is lower than inflation rates abroad while debt levels in the country rise.
C) Interest rates fall in the country while there is a serious recession in the country's main trading partner.
D) Taxes are decreased in the country while expectations of job security rise in the workforce.

Question

Quizplus · Accepted Answer

Decreasing taxes would lead to an increase in disposable income for households and firms, which would increase their consumption and investment, respectively. This would increase aggregate demand. Additionally, if expectations of job security rise, households may be more likely to consume and firms may be more likely to invest, further increasing aggregate demand. Choices A, B, and C may have mixed effects on aggregate demand, depending on other factors.

Which Set of Events Would Lead to an Increase in a Country's