The aggregate demand curve would shift to the right as a result of
A) a drop in the price level.
B) tax increases.
C) a decrease in the U.S. real interest rate.
D) a decrease in the amount of money in circulation.

Question

Quizplus · Accepted Answer

A decrease in the U.S. real interest rate would lead to an increase in consumption and investment spending, causing an increase in aggregate demand and a rightward shift of the AD curve. A drop in the price level (A) would result in a movement along the AD curve, not a shift. Tax increases (B) would decrease disposable income and reduce consumption and investment spending, causing a leftward shift of the AD curve. A decrease in the amount of money in circulation (D) would decrease spending, causing a leftward shift of the AD curve.

The Aggregate Demand Curve Would Shift to the Right as a Result