ECONOMICS
AGGREGATE DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Disposable income falls-spending drops, AD curve shifts left
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Income increases-spending increases, AD curve shifts right
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Consumer confidence drops causing less spending
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The AD curve shifts right as spending increases
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Detailed explanation-1: -The aggregate demand curve tends to shift to the left when total consumer spending declines. 2 Consumers might spend less because the cost of living is rising or because government taxes have increased. Consumers may decide to spend less and save more if they expect prices to rise in the future.
Detailed explanation-2: -The aggregate demand curve, or AD curve, shifts to the right as the components of aggregate demand-consumption spending, investment spending, government spending, and spending on exports minus imports-rise. The AD curve will shift back to the left as these components fall.
Detailed explanation-3: -Increases in taxes will decrease consumption (and shift the AD curve to the left) while decreases in taxes will increase consumption and shift the AD curve to the right. Consumer expectations about the future of the economy can have a strong impact on consumptions.
Detailed explanation-4: -With the increase in disposable income, private consumption will rise. Therefore the aggregate demand will increase, and the demand curve will shift to the right. An economic boom overseas will increase the U.S. net exports as foreigners increase their imports during the expansion.