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

-Which of the following would have caused aggregate demand to decrease in the graph,such as occurred during the Great Depression?
A) an increase in the money supply
B) a decrease in tax rates
C) a decrease in expected income
D) an increase in consumer sentiment
E) a decrease in savings

Question

Use the following graph to answer the following questions.This graph depicts an economy where aggregate demand has decreased,with no change in either short-run aggregate supply (SRAS)or long-run aggregate supply (LRAS).
 
-Which of the following would have caused aggregate demand to decrease in the graph,such as occurred during the Great Depression?
A) an increase in the money supply 
B) a decrease in tax rates 
C) a decrease in expected income 
D) an increase in consumer sentiment 
E) a decrease in savings

Quizplus · Accepted Answer

A decrease in expected income shifts the aggregate demand curve to the left, causing a decrease in both output and price level. This was one of the factors that contributed to the Great Depression. None of the other choices would lead to a decrease in aggregate demand in this graph.

Use the Following Graph to Answer the Following Questions