Question

A decrease in the expected price level

	a.	will cause the aggregate demand curve to shift to the left but an increase in the actual price level does not cause shifting.
	b.	will cause the aggregate demand curve to shift to the right but an increase in the actual price level will not cause shifting.
	c.	will cause the aggregate demand curve to shift to the left and an increase in the actual price level will also cause shifting to the left.
	d.	will cause the aggregate demand curve to shift to the right and an increase in the actual price level will also cause shifting to the right.

Answer 1

AD=C+I+G+X-M

So a decrease in the expected price level will cause the aggregate demand curve to shift to the left but an increase in the actual price level does not cause shifting. This is because the expected price decreases, so it is better to consume less today and consumer in near future at cheaper rate. Hence the AD curve shifts leftward but with the increase in the actual price leads to movement along the AD curve.

Hence option a is the correct answer.