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Which of the following events would have as the main effect to increase aggregate demand and...

Which of the following events would have as the main effect to increase aggregate demand and shift the AD curve rightward, thereby increasing the price level but also increasing GDP? (multiple answers)

(Hint: Whenever thinking about aggregate demand, use the formula, GDP or Y = C + I + G + In)

Group of answer choices

A. Consumer & business confidence is up, as the fear of recession recedes.

B. The “baby-boomers” retire and exit the work force.

C. Domestic consumers increase their purchases of real output.

D. Low interest rates cause an increase of residential housing construction.

E. OPEC increases production, thereby lowering the price of crude oil.

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Answer #1

Answer : The answer is option C.

If domestic consumers purchase more real output then the aggregate demand (AD) and consumption expenditure (C) increase. If AD increase then the AD curve shift to rightward. As a result, price level and GDP increase. On the other side, if C increase then also GDP increase. Therefore, option C is correct.

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