Which of the following would lead to an increase in aggregate demand?
A)an increase in consumer confidence
B)a decrease in the overall price level
C)an improvement in labor productivity
D)all of the above

Question

Quizplus · Accepted Answer

An increase in consumer confidence will lead to an increase in consumption, which is a component of aggregate demand.

Answer: D
 
- An increase in consumer confidence will lead to an increase in consumption, which is a component of aggregate demand. 
- A decrease in the overall price level will lead to an increase in consumption, investment, and net exports since goods and services are now cheaper, which increases the purchasing power of individuals, firms, and foreigners. Therefore, these components of aggregate demand will increase. 
- An improvement in labor productivity results in cost savings and better efficiency, which can lead to a reduction in prices, making goods and services cheaper. This increases the purchasing power of consumers and firms, which leads to an increase in consumption and investment, respectively. As a result, aggregate demand will increase.

Which of the Following Would Lead to an Increase in Aggregate