Question

A decrease in which of the following can be expected to shift the aggregate demand curve to the right?

(a) Taxes
(b) Interest rates
(c) Government spending
(d) Expected future prices

Answer 1

A decrease in taxes can be expected to shift the aggregate demand (AD) curve to the right because individuals and businesses have more disposable income, which increases their spending.

Step-by-step explanation:

The correct answer is (a) Taxes.

A decrease in taxes can be expected to shift the aggregate demand (AD) curve to the right. When taxes are decreased, individuals and businesses have more disposable income, which increases their spending. This increase in spending leads to a higher aggregate demand and shifts the AD curve to the right.

For example, let's say there is a decrease in income taxes. As a result, individuals have more money in their pockets, which they can spend on goods and services. This increased spending stimulates the economy and leads to a higher overall aggregate demand.