What factors cause shifts in the Aggregate Demand curve?

The Aggregate Demand curve represents the total quantity of goods and services demanded across all levels of the economy at various price levels. Shifts in this curve occur due to changes in its primary components, which include consumption, investment, government spending, and net exports.

When there is an increase in consumer confidence, for instance, households may spend more on goods and services, thus increasing overall consumption. Similarly, if businesses anticipate higher future demand, they may invest more in capital, which raises investment spending. Government policies, such as fiscal stimulus through increased spending or tax cuts, also directly impact aggregate demand. Furthermore, changes in net exports, influenced by factors like exchange rates and global economic conditions, can lead to an increase or decrease in demand for a country's goods and services abroad.

Thus, B is the correct answer because it encompasses the key factors that can shift the Aggregate Demand curve: variations in consumption, investment, government expenditure, and net exports, all of which directly influence the total demand in the economy.

In contrast, changes in input prices mainly affect the Aggregate Supply curve, while labor supply shifts primarily influence the long-term potential output of the economy, impacting the Aggregate Supply. Additionally, changes in interest rates are more accurately seen as influencing the components of Aggregate