Use the following diagram to answer the following questions.

-Refer to GDP Deflator. A shift in aggregate demand from AD₂ to AD₁ would most likely be caused by:

Question

Use the following diagram to answer the following questions.
 
-Refer to GDP Deflator. A shift in aggregate demand from AD₂ to AD₁ would most likely be caused by:

Quizplus · Accepted Answer

A shift from AD₂ to AD₁ implies a decrease in aggregate demand, which can be caused by a decrease in the money supply. This reduction in the money supply can lead to lower spending by consumers and businesses, thus shifting the aggregate demand curve to the left. Options A and B would likely increase aggregate demand, and D is a result of shifts in aggregate demand, not a cause.

Use the Following Diagram to Answer the Following Questions