If every household in Australia won a lottery which gave each of them an extra $50 000 to spend, the:
A) aggregate supply curve would shift to the right.
B) aggregate supply curve would shift to the left.
C) general price level would rise, causing a movement up the aggregate demand curve.
D) aggregate demand curve would shift to the right in the short-run.

Question

Quizplus · Accepted Answer

If every household in Australia won a lottery which gave each of them an extra $50,000 to spend, it would increase the disposable income of households, leading to an increase in consumption expenditure. This would lead to a shift in the aggregate demand curve to the right in the short-run. The aggregate supply curve would not shift as a result of this change. Additionally, as the aggregate demand curve shifts to the right, it would cause an increase in the general price level, leading to an upward movement along the aggregate demand curve.

If Every Household in Australia Won a Lottery Which Gave