Question

An increase in the price level will A. shift the aggregate demand curve to the left. B. move the economy up along a stationary aggregate demand curve. C. move the economy down along a stationary aggregate demand curve. D. shift the aggregate demand curve to the right.

Answer 1

Answer:

The correct answer is option B.

Explanation:

An increase in the price level would cause consumer spending to decrease as the purchasing power of the consumer will decline. This will cause the quantity of total output to decrease.  

As a result, there will be an upward movement on the same aggregate demand curve, indicating a contraction in the economy.  

A decrease in the price, on the other hand, would cause an expansion in the economy. It would be indicated by a downward movement on the same curve.