Which of the following correctly identifies components that cause shifts of aggregate demand?

Question

A. Changes in the price of inputs, productivity, and consumption
B. Changes in governmentpurchases, short-run supply shocks, and investment in stocks and bonds
C. Changes in consumption expenditures, investment, and net exports
D. Changes in the price of inputs, short-run supply shocks, and productivity

Answer 1

The correct answer is:

C. Changes in consumption expenditures, investment, and net exports

These components directly affect aggregate demand. Changes in consumption (household spending), investment (business spending on capital), and net exports (the difference between exports and imports) lead to shifts in the aggregate demand curve. Options A, B, and D mention factors more related to the supply side or don't pertain directly to shifts in aggregate demand.