Use the following graph to answer the following questions.The graph depicts an economy where aggregate demand and long-run aggregate supply (LRAS)have decreased,with no change in short-run aggregate supply (SRAS).

-Which of the following would have caused aggregate demand to decrease in the graph,such as occurred during the Great Recession?
A) an increase in expected income
B) a decrease in tax rates
C) a decrease in housing prices and stock prices
D) an increase in consumer sentiment
E) an advancement in technology

Question

Use the following graph to answer the following questions.The graph depicts an economy where aggregate demand and long-run aggregate supply (LRAS)have decreased,with no change in short-run aggregate supply (SRAS).
 
-Which of the following would have caused aggregate demand to decrease in the graph,such as occurred during the Great Recession?
A) an increase in expected income 
B) a decrease in tax rates 
C) a decrease in housing prices and stock prices 
D) an increase in consumer sentiment 
E) an advancement in technology

Quizplus · Accepted Answer

A decrease in housing prices and stock prices would cause a decrease in aggregate demand because consumers would have lower wealth and be more hesitant to spend. This was a key factor in the Great Recession. The other choices would likely increase aggregate demand.

Use the Following Graph to Answer the Following Questions