The aggregate demand curve is shifted rightward by
A) an increase in tax rates.
B) a decrease in government expenditure.
C) an increase in the federal budget surplus.
D) an increase in government expenditure.

Question

Quizplus · Accepted Answer

An increase in government expenditure will lead to an increase in aggregate demand, shifting the curve rightward. A decrease in government expenditure (choice B) would shift the curve leftward. An increase in tax rates (choice A) would reduce consumer spending, leading to a leftward shift in the curve. An increase in the federal budget surplus (choice C) means that the government is collecting more in taxes than it is spending, which could potentially lead to lower aggregate demand and a leftward shift in the curve.

The Aggregate Demand Curve Is Shifted Rightward by