Question

Which of the following would shift aggregate demand to the right? a. A fall in the price level increases the value of real wealth. b. There is a decline in consumer confidence. c. Stock market values increase by 20%. d. College graduates are having a difficult time finding jobs. e. The value of the dollar increases.

Answer 1

Answer:

Option “A” A fall in the price level increases the value of real wealth, is the right answer.

Explanation:

Option A is correct because there is an inverse relationship between price and demand of a commodity. If the price of the commodity increases, then its demand will decrease and the demand curve will shift leftwards. If the price decreases, its demand will increase and the demand curve will shift rightwards. Thus, a fall in price level and an increase in real wealth shows that people have more purchasing power. Thus demand will increase and consequently the demand curve will shift rightwards.