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) decrease in the money supply.
B) decrease in taxes.
C) increase in the price level.
D) increase 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) decrease in the money supply. 
B) decrease in taxes. 
C) increase in the price level. 
D) increase in government spending.

Quizplus · Accepted Answer

A movement from curve AD₁ to curve AD₀ indicates a decrease in aggregate demand, which can be caused by a decrease in the money supply. Decreases in taxes or increases in government spending would shift the aggregate demand curve to the right, indicating an increase in aggregate demand, not a decrease. An increase in the price level affects the movement along the aggregate demand curve, not a shift from one curve to another.

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