Question

Which of the following will cause a rightward shift in aggregate demand?

(i) Expected increase in firm profits.

(ii) A decrease in income tax rates.

(iii) An increase in expected future income.

(iv) A fall in the price level.

Answer 1

The aggregate demand curve, or AD curve, shifts to the right as the components of aggregate demand—consumption spending, investment spending, government spending, and spending on exports minus imports—rise.

Answer - (iii) An increase in expected future income.