Question

Imagine that the economy is in long-run equilibrium. Then, perhaps because of improved international relations and increased confidence in policy makers, people become more optimistic about the future and stay this way for some time.

a. aggregate supply shifts right.
b. aggregate demand shifts right
c. aggregate demand shifts left
d. aggregate supply shifts left.

Answer 1

b. aggregate demand shifts right

Step-by-step explanation:

When the aggregate demand curve shifts right, the quantity of output demanded for a given price level rises. Therefore, a shift of the aggregate demand curve to the right represents an economic expansion.