Use the following to answer questions . Exhibit: Using the Aggregate Demand/Aggregate Supply Model 1 -(Exhibit: Using the Aggregate Demand/Aggregate Supply Model 1) Suppose the economy is initially in short-run equilibrium at B. A shift from AD₁ to AD₂ could have been caused by all of the following except A) an increase in consumer optimism. B) economic prosperity in foreign economies. C) a personal income tax cut. D) an increase in the price level from P_a to P_b.

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Quizplus · Accepted Answer

Option D is the correct answer because an increase in the price level from P_a to P_b represents a movement along the short-run aggregate supply curve, not a shift in either the aggregate demand or aggregate supply curve. Options A, B, and C can all cause a shift in the aggregate demand or aggregate supply curves, leading to a new short-run equilibrium.

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