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All of the following, except one, would cause the aggregate demand curve to shift to the right. which is the exception?

a) an increase in taxes
b) an increase in government spending on goods and services
c) an increase in the money supply
d) a decrease in the exchange rate

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User Yvrose
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1 Answer

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Final answer:

The option that would not cause the aggregate demand curve to shift to the right is an increase in taxes; instead, it usually leads to a leftward shift in the AD curve. Other options, including increased government spending, a higher money supply, and a decreased exchange rate, shift the AD curve to the right.

Step-by-step explanation:

The exception among the factors that would cause the aggregate demand (AD) curve to shift to the right is an increase in taxes. When taxes increase, consumers and businesses have less disposable income and capital for spending and investment, respectively. This decrease in consumption and investment can lead to a shift of the AD curve to the left instead of the right, depressing income and price levels, contrary to the effects of increased government spending, a higher money supply, and a decreased exchange rate.

Options that would cause the AD curve to shift to the right include an increase in government spending on goods and services, such as military and healthcare spending, which stimulates economic activity. Similarly, an increase in the money supply typically lowers interest rates, making borrowing cheaper and encouraging spending and investment, thus shifting the AD curve to the right. Lastly, a decrease in the exchange rate makes a country's goods cheaper for foreign buyers, increasing exports, and ultimately shifting the AD curve to the right as well.

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User Elcaro
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