Shifting the Aggregate Demand Curve

Question 1

three main ways to shift the curve

Answer 1

• changes in income
• changes in interest rates
• changes in expectations (consumer confidence)

Question 2

changes in income

Answer 2

• decrease in income causes curve to shift left

- increase in income shifts right

Question 3

changes in interest rates

Answer 3

• if interest rate falls, curve shifts right

- if interest rate rises, curve shifts left

Question 4

changes in expectations

Answer 4

• if consumers expect their financial situation will improve, curve will shift right
• if they expect their financial situation to worsen, curve will shift left (downward)

Question 5

what would increase aggregate demand

Answer 5

increase in income

Question 6

NOT a determinant of AD

Answer 6

government taxes

Question 7

what do these determinants have the power to do

Answer 7

shift the ADC

Question 8

NOT impact AD of goods and services

Answer 8

decrease in government spending

Question 9

if the interest rate changed from 10% to 2%, what would happen to borrowing

Answer 9

increase in borrowing