The figure above shows aggregate demand curves.
-Based on the figure above,the aggregate demand curve will shift from AD0 to AD2 when
A)potential GDP increases.
B)the price level falls.
C)the price level rises.
D)government expenditure decreases.
E)taxes are lowered.

Question

The figure above shows aggregate demand curves.
-Based on the figure above,the aggregate demand curve will shift from AD0 to AD2 when
A)potential GDP increases. 
B)the price level falls. 
C)the price level rises. 
D)government expenditure decreases. 
E)taxes are lowered.

Quizplus · Accepted Answer

Lowering taxes increases disposable income, leading to higher consumer spending, which shifts the aggregate demand curve to the right from AD0 to AD2.

The Figure Above Shows Aggregate Demand Curves