If businesses buy fewer capital goods,and nothing else changes,then total expenditures on U.S.goods and services will decrease.And if total expenditures decrease,then __________ will decrease; consequently,the __________ curve will shift __________.
A) aggregate demand (AD); AD; rightward
B) short-run aggregate supply (SRAS); SRAS; leftward
C) aggregate demand (AD); AD; leftward
D) interest rates; AD; leftward
E) prices; AD; rightward

Question

Quizplus · Accepted Answer

If businesses buy fewer capital goods, this will decrease total expenditures on U.S. goods and services. As a result, aggregate demand (AD) will decrease. The SRAS curve should not be affected since nothing happened to the production costs. Therefore, the correct choice is C, which states that AD will decrease and the AD curve will shift leftward. The other choices are incorrect because they do not reflect the relationship between capital goods purchases and aggregate demand.

If Businesses Buy Fewer Capital Goods,and Nothing Else Changes,then Total