Which one of the following would NOT increase aggregate demand?
A) an increase in long-run aggregate supply
B) a reduction in real interest rates
C) tax decreases
D) an increase in the amount of money in circulation

Question

Quizplus · Accepted Answer

An increase in long-run aggregate supply would shift the long-run aggregate supply curve to the right, resulting in a decrease in the price level and an increase in real GDP. However, it would not directly increase aggregate demand, which is the total amount of goods and services demanded in the economy at a given price level. Therefore, choice A is the correct answer. On the other hand, choices B, C, and D would all increase aggregate demand. A reduction in real interest rates would increase consumption and investment spending, tax decreases would increase disposable income and consumption, and an increase in the amount of money in circulation would increase spending on goods and services.

Which One of the Following Would NOT Increase Aggregate Demand