Question

A rise in business confidence will lead to:

a. a leftward shift of the AD curve
b. a leftward movement along the AD curve
c. a rightward shift of the AD curve
d. a rightward movement along the AD curve.

Answer 1

A rise in business confidence will shift the Aggregate Demand curve to the right, resulting in higher output and prices.

Therefore, option D is correct.

Step-by-step explanation:

A rise in business confidence will lead to an outward shift in the Aggregate Demand (AD) curve, resulting in a rightward movement along the curve. This shift is due to the increased consumption and investment demand associated with higher confidence. The new equilibrium point will have a higher quantity of output and a higher price level compared to the original equilibrium point.