Which of the following would shift the aggregate demand curve to the right?
A) an increase in government spending
B) an increase in taxes
C) an increase in interest rates
D) an increase in labor productivity

Question

Quizplus · Accepted Answer

An increase in government spending would increase the demand for goods and services and, therefore, shift the aggregate demand curve to the right. 
 
Option B is incorrect because an increase in taxes would decrease consumer disposable income and, therefore, decrease the demand for goods and services, leading to a leftward shift of the aggregate demand curve.

Option C is incorrect because an increase in interest rates would increase borrowing costs, decreasing consumer spending and investment, leading to a leftward shift of the aggregate demand curve.

Option D is incorrect because an increase in labor productivity would decrease production costs, leading to an increase in aggregate supply rather than demand.

Which of the Following Would Shift the Aggregate Demand Curve