If firms' expectations about the future become pessimistic so that they think future profits will be...
If firms' expectations about the future become pessimistic so that they think future profits will be lower, then
A.
aggregate demand decreases and the AD curve shifts leftward.
B.
the aggregate demand curve does not shift but potential GDP decreases.
C.
aggregate demand increases and the AD curve shifts rightward.
D.
the quantity of real GDP demanded decreases and there is a movement up along the AD curve.
E.
the quantity of real GDP demanded increases and there is a movement down along the AD curve.
Homework Answers
A is correct
When consumers become pessimistic they decrease their spending. This leads to decrease in aggregate demand and aggregate demand shifts leftward.
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38.39,40
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