Which of the following would most likely reduce aggregate demand (shift the AD curve to the left)?

Question

Multiple Choice
a reduced amount of excess capacity
increased government spending on military equipment
an appreciation of the U.S. dollar
increased consumer optimism regarding future economic conditions

Answer 1

The factor that would most likely reduce aggregate demand and shift the AD curve to the left is:

an appreciation of the U.S. dollar.

An appreciation of the dollar makes U.S. goods more expensive for foreign buyers, leading to a decrease in exports. This reduction in export demand can contribute to a leftward shift in the aggregate demand curve. The other options either increase aggregate demand or are neutral with respect to aggregate demand.