As world economies start to recover from the 2008 financial crisis and firms expect profits to increase,
A) investment will increase and there will be a movement up along the aggregate demand curve.
B) both investment and aggregate demand will increase.
C) the price level in the U.S. will decrease as firms increase investment.
D) the U.S. short-run aggregate supply curve immediately will shift rightward.

Question

Quizplus · Accepted Answer

As firms expect profits to increase, they are likely to increase both investment and production in order to meet the expected demand. This will lead to an increase in both aggregate demand and investment. Therefore, choice B is the most appropriate answer.

As World Economies Start to Recover from the 2008 Financial