Answer to Question #95120 in Macroeconomics for Chris Rodrigues

Question

Which one of the following factors could have caused the Rightward shift in the curve from AD0 to AD1, ceteris paribus?

[1] An increase in total production
[2] A decrease in the government spending
[3] An increase in taxes
[4] A reduction in imports

Answer 1

[1] An increase in total production

Aggregate demand (AD) curve refers to a curve which show real output that individuals are willing and able to purchase at the different price levels, all other things constant. Increase in government spending, increase in consumption, and decrease in taxes will lead to a shift of the AD curve right ward. When there is an increase in total production in the economy, the consumption of the domestic products increases shifting rightward from AD0 to AD1.