The figure above shows aggregate demand curves.
-Based on the figure above, the aggregate demand curve will shift from AD₀ to AD₂ when
A)potential GDP increases.
B)the price level falls.
C)the price level rises.
D)government expenditure decreases.
E)taxes are lowered.

Question

The figure above shows aggregate demand curves.
-Based on the figure above, the aggregate demand curve will shift from AD₀ to AD₂ when
A)potential GDP increases. 
B)the price level falls. 
C)the price level rises. 
D)government expenditure decreases. 
E)taxes are lowered.

Quizplus · Accepted Answer

Lowering taxes increases disposable income, leading to higher consumer spending, which shifts the aggregate demand curve to the right from AD₀ to AD₂.

The Figure Above Shows Aggregate Demand Curves