The following graph shows an increase in aggregate demand (AD) in a hypothetical

Question

The following graph shows an increase in aggregate demand (AD) in a hypothetical country. Specifically, aggregate demand shifts to the right from AD1 to AD2, causing the quantity of output demanded to rise at all price levels. For example, at a price level of 140, output is now $400 billion, where previously it was $300 billion.

Consumer expectations _______(improve/worsen)

Government spending ________(increase/decrease)

Expected rate of return on investment  ________(increase/decrease)

Incomes in other countries ________(increase/decrease)

Explanation / Answer

1.improve; 2.increase;3.increase; 4.increase

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