Which of the following causes an upward shift in aggregate demand?

Question

Quizplus · Accepted Answer

An increase in government spending will increase overall spending in the economy, leading to an increase in aggregate demand.

Answer: D
 A rise in the demand for money will lead to lower interest rates, making borrowing cheaper for firms and individuals, which will increase overall spending and aggregate demand.

Option A is incorrect because an increase in the aggregate price level would cause a decrease in aggregate demand (due to inflation). Option C is also incorrect because a sudden fall in productivity would decrease output and potentially cause a decrease in aggregate demand.

Which of the Following Causes an Upward Shift in Aggregate