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An increase in aggregate demand (a shift of the AD curve to the right) indicates that decision makers will purchase a larger quantity of goods and services at ...
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Changing M is monetary policy. Also because Y = C + I + G + NX, demand side variables can shift AD as well. Changing G or T is fiscal policy.
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Effect of an increase on AD. Effect of a decrease on AD. Taxes. C,I. Decrease so. AD <= Increase so. AD =>. Interest Rates. C. Decrease so. AD <= Increase so.
In Panel B the AD curve shifts to the right leading to higher output and actual prices higher than the expected level. The short run equilibrium is at point B ...
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