Which of the following will result if businesses expect future demand to increase?
a. movement down the aggregate demand curve.
b. movement up the aggregate demand curve.
c. rightward shift of the aggregate demand curve.
d. leftward shift of the aggregate demand curve.
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Of the options given here, the best answer is C. If businesses expect that consumer demand will increase, then aggregate demand will increase. An increase in aggregate demand is shown on a graph by a movement of the curve to the right.
If businesses believe that consumer demand is about to rise they will start to increase their own spending. They may, for example, invest in new production facilities to accommodate the rise in demand that they anticipate. When this happens, aggregate demand will increase. This is represented by a movement of the curve to the right, making C the correct answer.
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