For a given inflation rate, if concerns about future weakness in the economy cause businesses to reduce their spending on new capital, then the ______ shifts _____.
A) aggregate demand curve; right
B) aggregate demand curve; left
C) aggregate supply curve; upward
D) aggregate supply curve; downward

Question

Quizplus · Accepted Answer

Reduction in business spending on new capital reduces the demand for goods and services, causing a shift in the aggregate demand curve to the left. This shift leads to a decrease in the overall level of output and employment in the economy.

For a Given Inflation Rate, If Concerns About Future Weakness