Figure 14.1
-Figure 14.1 shows three aggregate demand curves. A movement from curve AD₁ to curve AD₀ could be caused by a(n)
A) increase in the money supply.
B) decrease in taxes.
C) increase in the price level.
D) decrease in government spending.

Question

Figure 14.1
-Figure 14.1 shows three aggregate demand curves. A movement from curve AD₁ to curve AD₀ could be caused by a(n)
A) increase in the money supply. 
B) decrease in taxes. 
C) increase in the price level. 
D) decrease in government spending.

Quizplus · Accepted Answer

A movement from curve AD₁ to curve AD₀ would represent a decrease in aggregate demand, which could be caused by a decrease in government spending (which would shift the AD curve to the left). An increase in the money supply or a decrease in taxes would shift the AD curve to the right, leading to an increase in aggregate demand. An increase in the price level would not cause a movement along the AD curve, but rather a shift to a new AD curve at a higher price level.

Figure 14.1 -Figure 14.1 Shows Three Aggregate Demand Curves. a Movement from Movement