Which of the following will increase aggregate demand?
Question 1
Which of the following will increase aggregate demand?
[select all that apply]
An increase in expected inflation
A decrease in government spending
An increase in the money supply
An decrease in the exchange rate of domestic and foreign currency
A decrease in taxes
A decrease in expected profits
Question 2
If potential GDP increases we will see:
SRAS move right
LRAS move right
SRAS move left
LRAS move left
OSRAS and LRAS move right
SRAS and LRAS move left
Homework Answers
1. An increase in the money supply; A decrease in the exchange
rate of domestic and foreign currency; A decrease in taxes.
(All these factors will increase aggregate demand in the
economy.)
2. LRAS move right.
(Increase in potential GDP shifts only LRAS to the right.)
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