What factors can shift aggregate demand?

The correct choice highlights that changes in consumer confidence and taxes are significant factors that can shift aggregate demand. Aggregate demand represents the total demand for goods and services within an economy at a given overall price level and in a given time period.

When consumer confidence increases, individuals are more likely to spend money, which boosts consumption—a major component of aggregate demand. Conversely, if consumer confidence is low, people may hold back on spending, leading to a decline in aggregate demand.

Changes in taxes also play a critical role. For instance, a tax cut increases disposable income for households, encouraging them to spend more on goods and services. Similarly, an increase in taxes can reduce disposable income, consequently decreasing consumption and shifting aggregate demand to the left.

In contrast, changes in production costs, technological advancements, and government regulations primarily influence aggregate supply rather than aggregate demand. Production costs impact how much businesses are willing to supply at various price levels. Technological advancements can lead to more efficient production processes or new products, affecting supply dynamics. Government regulations may impose constraints or incentives that affect production strategies, again influencing aggregate supply more than demand.