A decline in household income that sets off a multiplier process causes
A)An increase in AS.
B)A decrease in AS.
C)An increase in AD.
D)A decrease in AD.

Question

Quizplus · Accepted Answer

A decline in household income will lead to a decrease in consumption. This will cause a decrease in aggregate demand (AD) due to the multiplier effect (where a decrease in consumption leads to a decrease in production and thus a decrease in income).

A Decline in Household Income That Sets Off a Multiplier