Curve shifts

Question 1

when does the AD curve shift right?

Answer 1

-C (Consumption) increases → e.g., consumer confidence, tax cuts

-I (Investment) increases → e.g., interest rates go down

-G (Government spending) increases

-X increases or M decreases → Exports rise or imports fall

Question 2

when does the AD curve shift left?

Answer 2

-Consumers save more (less C)

-Firms stop investing (less I)

-Taxes go up or interest rates rise

-Global demand drops → exports fall

📌 EASY TRICK: If total spending increases, AD shifts right. If it drops, AD shifts left.

Question 3

when does the AS curve shift right?

Answer 3

-Costs fall (cheaper oil, lower wages)

-Productivity increases (better tech or training)

-More resources available (immigration, new land discovered)

Question 4

when does the AS curve shift left?

Answer 4

-Costs rise (energy, wages, raw materials)

-Natural disasters or supply chain problems

-Labour shortages

📌 TRICK: If it gets easier to produce, AS shifts right. If it gets harder or more expensive, AS shifts lef

Question 5

when does the AE line shift up?

Answer 5

-Any component of AE increases (C, I, G, or X – M)

-More transfers (TR↑), less taxes (T↓)

➡️ This leads to a higher equilibrium income (Y↑)

Question 6

when does the AE line shifts down?

Answer 6

Any component of AE decreases

Cuts to government spending, higher taxes, lower confidence

📌 TRICK: Think of AE line as total spending. More spending → up. Less spending → down.