ECONOMICS
AGGREGATE DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Curve shifts left
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No change in curve
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Curve slopes up
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curve shifts right
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Detailed explanation-1: -If the AD curve shifts to the left, then the equilibrium quantity of output and the price level will fall.
Detailed explanation-2: -If confidence declines, then aggregate demand will decline along with it, which, in turn, will decrease confidence even further. Likewise, when confidence increases: aggregate demand increases, which further increases business and consumer confidence. However, the reinforcing decreases or increases are self-limiting.
Detailed explanation-3: -Increasing consumer confidence increases consumer spending. The aggregate demand curve shifts to the right, indicating an increase in demand for goods and services.
Detailed explanation-4: -Answer: A reduction in consumer confidence will cause a reduction in consumption and, therefore, a reduction in demand and a leftward shift in the IS curve. As Y decreases, money demand will decrease causing the interest rate to fall.
Detailed explanation-5: -An increase in the stock market will increase people’s wealth, which means they have more money, so will increase consumer spending. That will increase, or shift, aggregate demand to the right. A decrease in government spending would definitely decrease the aggregate demand.