Final answer:
An increase in investment spending due to higher expected rates of return causes the aggregate expenditures curve to shift upward and the aggregate demand curve to shift rightward, signaling a greater level of total spending at every price level.
Step-by-step explanation:
An increase in investment spending caused by higher expected rates of return will shift the aggregate expenditures curve upward and the aggregate demand curve to the right. This is because higher expected returns on investment lead to increased investment spending, which is a component of aggregate demand. Therefore, more total spending would occur at every price level, resulting in the outward shift of the aggregate demand curve.
When investment spending increases, businesses are likely to invest more in capital goods, potentially leading to higher productivity and output in the future. This increase in investment does not impact the aggregate supply curve in the short run; instead, it elevates the aggregate demand, which represents a higher demand for goods and services at any given price level. Hence, the correct answer would be option D) shift the aggregate expenditures curve upward and the aggregate demand curve to the right.