The figure above shows the aggregate demand curve.
-The aggregate demand curve in the figure above shifts rightward if
A)potential GDP increases.
B)the money wage rate falls.
C)taxes are raised.
D)government expenditure increases.
E)the Federal Reserve raises the interest rate.

Question

The figure above shows the aggregate demand curve.
-The aggregate demand curve in the figure above shifts rightward if
A)potential GDP increases. 
B)the money wage rate falls. 
C)taxes are raised. 
D)government expenditure increases. 
E)the Federal Reserve raises the interest rate.

Quizplus · Accepted Answer

The aggregate demand curve shifts rightward when government expenditure increases because this leads to increased spending and investment, which increases aggregate demand. None of the other choices would cause a rightward shift in the aggregate demand curve.

The Figure Above Shows the Aggregate Demand Curve