Question

Which of the following would cause the AD curve to shift to the left? An increase...

Which of the following would cause the AD curve to shift to the left?

An increase in tax rates
An increase in military purchases
An increase in unemployment compensation
A decrease in sales taxes

A decrease in potential GDP

Which of the following would cause the AD curve to shift to the right?

An increase in sales taxes
An increase in potential GDP
A decrease in unemployment compensation
An increase in social security payments
A decrease in military purchases
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Homework Answers

Answer #1

AD= C+I+G-T+NX

so when tax rates increase the aggregate demand will fall leading to a shift to left

when the unemployment benefit incxreases the unemployed will have more to spend than before so the aggregate demand will increase in this case

military purchgases will increase AD and shift it to right

Any type of tax cut will increase the AD and shift the curve to right

AS is affected by potnetial GDP

so only an increase in tax rates shift AD to left

2) AD curve will shift

AD curve will shift to left when any tax increases

decrease in unemployment compensation will force unemployed people to spend less

if sociala sceurity payments increase people will have more disposable income so AD curve shifts to right

military purchases reduction will reduce aggregated demand

so only increase in social security benefit will shift AD curve to right

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