An increase in aggregate demand (AD) is shown on a diagram by

Question

BlackTom AI · Accepted Answer

Question restatement: An increase in aggregate demand (AD) is shown on a diagram by
Option provided: a. a rightward shift of the AD curve.

Analysis of the option:
- Conceptual idea: An increase in aggregate demand means that at every price level, total spending in the economy is higher than before. This is commonly illustrated by shifting the entire AD curve to the right, rather than just moving along the curve.
- Why the rightward shift is correct: In an AD–AS framework, a constant relationship between price level and desired spending is represented by the position of the AD curve. When aggregate demand rises, the whole curve shifts to the right, indicating higher quantity demanded at each price level. This is the standard graphical representation of an increase in AD.
- Common alternative misunderstanding: A movement along the curve would imply a change in quantity demanded due to a change in the price level, keeping the overall determinants of AD the same. That describes a change along the curve, not an increase in AD itself.
- Potential effects noted in interpretation: The rightward shift typically leads to higher equilibrium output and, depending on the slope of the short-run aggregate supply, a higher price level in the short run. While the precise outcome (how much price level rises) depends on AS conditions, the direction of the shift correctly captures an increase in overall demand.
- About the other options: There are no other options provided to analyze here; with only one option, the focus remains on whether this option correctly represents an increase in AD, which it does.

Summary reasoning: The correct graphical representation of an increase in aggregate demand is a rightward shift of the AD curve, since the entire demand schedule at every price level expands, not just a movement along the curve caused by a price change.

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