Which of the following will increase aggregate demand in the United States?
A) a higher price level
B) an increase in the real interest rate
C) an increase in wealth due to a substantial appreciation in the value of stocks
D) a decrease in real income in Japan and Western Europe

Question

Quizplus · Accepted Answer

An increase in wealth due to a substantial appreciation in the value of stocks will increase aggregate demand as people will have more disposable income and will be able to spend more. A higher price level (A) will decrease aggregate demand as people will have less purchasing power. An increase in the real interest rate (B) will also decrease aggregate demand by discouraging borrowing and spending. A decrease in real income in Japan and Western Europe (D) may have an impact on the U.S. economy through its effect on U.S. trade, but it will not directly increase aggregate demand.

Which of the Following Will Increase Aggregate Demand in the United