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

Question

BlackTom AI · Accepted Answer

To analyze how an increase in aggregate demand (AD) is depicted on a diagram, we need to recall what the AD curve represents and how its position changes.
Option a: 'a leftward shift of the AD curve.' A leftward shift would indicate a decrease in aggregate demand, not an increase. This would move the AD curve to the left, showing lower overall demand in the economy at any given price level. Therefore this choice describes the opposite of what an increase in AD entails.
Option b: 'a movement along the AD curve.' Movements along the AD curve occur when the price level changes, holding the other determinants of AD constant. They do not represent a change in the overall level of AD itself. Since the question specifies an increase in AD, a simple movement along the curve would not capture that.
Option c: 'a rightward shift of the AD curve.' A shift to the right means that for every price level, the quantity of real output demanded is higher, reflecting an overall increase in components of AD such as consumption, investment, government spending, and net exports. This is the standard diagrammatic representation of an increase in aggregate demand.
Option d: 'an upward shift of the AD curve.' The concept of 'upward' versus 'downward' shift is not standard in AD analysis because the AD curve is typically drawn with the price level on the vertical axis and real GDP on the horizontal axis, and shifts are described as left/right (or outward/inward) rather than upward/downward. An 'upward shift' could be ambiguous and is not the conventional terminology used to describe an increase in AD.
In summary, the only option that accurately captures an increase in aggregate demand on the standard AD-AS diagram is a rightward shift of the AD curve, since it represents higher demand across all price levels.

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