Question

"Which of the following factors will cause an increase in aggregate demand"? Question 6 options: a) an increase in exports b) uncertainty about the health of the economy c) a lack of confidence in the health of the banking industry d) a lack of confidence in the government

Answer 1

Answer: The answer is a) an increase in exports

Explanation:

In an economy, when the nominal money stock in increased, it leads to higher real money stock at each level of prices. The interest rates decrease which causes the public to hold higher real balances. This stimulates aggregate demand, which increases the equilibrium level of income and spending.