A fall in prices causes:
A)a leftward shift of the aggregate demand curve
B)a rightward shift of the aggregate supply curve.
C)a rightward shift of the aggregate demand curve.
D)movement along a curve, not a shift in a curve.

Question

Quizplus · Accepted Answer

A fall in prices will cause movement along the aggregate demand curve, as a lower price level will increase the quantity demanded of goods and services. This is represented by a movement leftward along the aggregate demand curve. It does not cause a shift in the curve. Similarly, a fall in prices will not cause a shift in the aggregate supply curve as the quantity supplied is not affected by changes in the price level. Therefore, the correct answer is D - movement along a curve, not a shift in a curve.

A Fall in Prices Causes