Question

What is the difference between a movement along the aggregate demand (AD) curve and a shift of the aggregate demand curve? Explain in terms of what causes a movement and what causes a shift.

Answer 1

Consider what is producing the change to determine whether it is a shift or a movement. It is a movement along the curve if the cause is a change in the price level. The entire AD curve will shift if the source is something other than a change in the price level.