-The aggregate demand curve in the figure above shifts rightward if
A) potential GDP increases.
B) government expenditure decreases.
C) the money wage rate falls.
D) taxes are raised.
E) the Reserve Bank lowers the interest rate.

Question

-The aggregate demand curve in the figure above shifts rightward if
A) potential GDP increases. 
B) government expenditure decreases. 
C) the money wage rate falls. 
D) taxes are raised. 
E) the Reserve Bank lowers the interest rate.

Quizplus · Accepted Answer

A decrease in the interest rate by the Reserve Bank makes borrowing cheaper, encouraging spending and investment, which increases aggregate demand and shifts the curve rightward.

-The Aggregate Demand Curve in the Figure Above Shifts Rightward