Suppose that the stock market crashes, which causes a large decrease in the value of many households' financial assets. The most likely outcome is a _____ the aggregate demand curve.
A) rightward shift of
B) leftward shift of
C) movement up
D) movement down

Question

Quizplus · Accepted Answer

A stock market crash leads to a decrease in the value of financial assets, which reduces household wealth. As a result, households will cut back on their spending, leading to a decrease in aggregate demand. This results in a leftward shift of the aggregate demand curve.

Suppose That the Stock Market Crashes, Which Causes a Large