The recession of 2007-2009 made many consumers pessimistic about their future incomes. How does this increased pessimism affect the aggregate demand curve? A) This will move the economy up along a stationary aggregate demand curve. B) This will move the economy down along a stationary aggregate demand curve. C) This will shift the aggregate demand curve to the left. D) This will shift the aggregate demand curve to the right.

Question

Business

Madalyn Cantrell

19 May, 01:50

The recession of 2007-2009 made many consumers pessimistic about their future incomes. How does this increased pessimism affect the aggregate demand curve? A) This will move the economy up along a stationary aggregate demand curve. B) This will move the economy down along a stationary aggregate demand curve. C) This will shift the aggregate demand curve to the left. D) This will shift the aggregate demand curve to the right.

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Answers (1)

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Jacquelyn Gomez · Answer 1

C) This will shift the aggregate demand curve to the left.

Explanation:

The demand curve is graphed on one axis being price level and the other axis being the total amount of goods and services purchased.

If consumer is pessimistic about their future incomes, they will want to save more and spend less, so they will demand less less goods and services at any price level than they used to before the recession (at that corresponding price level) = => demand curve shift left.