Which of the following events will cause the largest rightward shift (as measured horizontally)of the AD curve?
A)a tax increase
B)a 15% reduction in the aggregate price level
C)a 10% increase in the nominal money supply
D)a 15% reduction in the nominal wage
E)none of the above

Question

Quizplus · Accepted Answer

A 10% increase in the nominal money supply will cause the largest rightward shift of the AD curve as it directly affects the availability of money and consequently the purchasing power of consumers. This leads to an increase in aggregate demand, causing the AD curve to shift to the right. A tax increase, a reduction in the aggregate price level, and a reduction in the nominal wage will all lead to a leftward shift of the AD curve.

Which of the Following Events Will Cause the Largest Rightward