152k views
3 votes
Which of the following will shift the aggregate demand curve to the right?

a. A decrease in the value of the stock market
b. Pessimistic consumer expectations about the economy
c. An increase in government spending
d. A decrease in disposable income

1 Answer

4 votes

Final answer:

The option that will shift the aggregate demand curve to the right is "c. An increase in government spending."

Step-by-step explanation:

Aggregate demand (AD) represents the total demand for goods and services within an economy at different price levels. When the aggregate demand curve shifts to the right, it signifies an increase in overall demand at every price level. Among the options provided, an increase in government spending (c) is the factor that will shift the aggregate demand curve to the right. When the government increases its spending on goods and services, it directly contributes to the overall demand within the economy. This increased spending leads to higher economic activity, which in turn boosts the aggregate demand.

Conversely, the other options listed—such as a decrease in the value of the stock market (a), pessimistic consumer expectations about the economy (b), and a decrease in disposable income (d)—would likely have the opposite effect. These factors generally decrease consumer confidence and spending, leading to a reduction in overall demand and causing the aggregate demand curve to shift to the left. However, an increase in government spending is an example of an expansionary fiscal policy that aims to stimulate economic activity, thus shifting the aggregate demand curve to the right by increasing overall demand for goods and services.

User Teofilo
by
7.8k points