Movement Along AD Curve Due to Price Level Change

Steps:

• Identify that a downward movement along the AD curve (from L to M) indicates a decrease in the price level, increasing quantity of real GDP demanded.
• Recognize this as a change in price level, not a shift of the curve itself.
• Distinguish between demand-side shifters (which move the curve) and supply-side changes (which cause movement along AD).
• Evaluate options: only supply-side shifts affect prices and output without shifting AD.

Why B is correct:

• A decrease in taxes on firms increases SRAS (rightward shift per the aggregate supply model), lowering the price level and causing movement down along the unchanged AD curve.

Why the others are wrong:

• A: Increase in tariffs shifts AD leftward, not along the curve.
• C: Increase in consumer confidence shifts AD rightward via higher consumption.
• D: Slowdown and decreased investment shift AD leftward via reduced spending.

Final answer: B