Which of the following will shift the aggregate demand curve to the right?

• A. A fall in net exports
• B. An increase in consumer confidence
• C. A rise in interest rates
• D. A decrease in government spending

Answer: (B)

Verified step by step guidance

1. Step 1: Understand what the aggregate demand (AD) curve represents. The AD curve shows the total quantity of goods and services demanded across all levels of an economy at different price levels.
2. Step 2: Recall that factors which increase overall spending in the economy will shift the AD curve to the right, indicating higher demand at every price level.
3. Step 3: Analyze each option in terms of its effect on total spending: a fall in net exports reduces demand from foreign buyers, so it shifts AD to the left; a rise in interest rates makes borrowing more expensive, reducing consumption and investment, shifting AD to the left; a decrease in government spending lowers public sector demand, shifting AD to the left.
4. Step 4: Consider an increase in consumer confidence. When consumers feel more optimistic about the economy, they tend to spend more, increasing consumption, which is a major component of aggregate demand. This increased spending shifts the AD curve to the right.
5. Step 5: Conclude that among the options, only an increase in consumer confidence leads to a rightward shift of the aggregate demand curve because it boosts overall spending in the economy.