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What is the general lesson about the effect of a rightward shift of the aggregate demand curve on real GDP and the price level, compared with a leftward shift?
AA rightward shift lowers both GDP and the price level
BAD shifts only ever move the price level, not GDP
CAD shifts only ever move GDP, not the price level
DA rightward shift raises GDP and lifts the price level
Answer & Solution
Correct answer: D. A rightward shift raises GDP and lifts the price level
1. This holds as the general, direction-independent rule for AD shifts.
2. A rightward AD shift raises both real GDP and the price level.
3. A leftward AD shift lowers both real GDP and the price level, the mirror image.
4. How large each effect is depends on whether the shift crosses a flat or steep part of the AS curve, but the direction always holds.
_Source: OpenStax Principles of Macroeconomics for AP Courses (CC BY 4.0), Ch 10 "The Aggregate Demand/Aggregate Supply Model", section 10.4 | Shifts in Aggregate Demand_
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