Which of the following would be most likely to cause a reduction in current aggregate demand in the United States?
A) Increased business optimism about the future.
B) The economies of key trading partners fall into a recession.
C) A sharp increase in the value of stocks owned by Americans.
D) An increase in the expected rate of inflation.

Question

Quizplus · Accepted Answer

If the economies of key trading partners fall into a recession, this will likely reduce demand for American goods and services, which will in turn reduce aggregate demand in the United States. Increased business optimism (A) and a sharp increase in the value of stocks (C) are more likely to increase aggregate demand in the short term. An increase in the expected rate of inflation (D) may actually increase aggregate demand in the short term as people rush to buy goods before prices rise further.

Which of the Following Would Be Most Likely to Cause