During the dot-com bubble, consumers believed that the Internet would radically change the shopping experience and lead to higher incomes throughout the economy. How would the dot-com bubble be best represented in the AD/AS model?
A) The aggregate demand curve shifts right.
B) The aggregate demand curve shifts left.
C) Prices increase along the aggregate demand curve.
D) Prices decrease along the aggregate demand curve.

Question

Quizplus · Accepted Answer

The dot-com bubble, characterized by high consumer expectations for the Internet's impact on shopping and income, would increase consumer and business spending. This is represented in the AD/AS model by a rightward shift of the aggregate demand curve, indicating higher demand for goods and services at every price level.

During the Dot-Com Bubble, Consumers Believed That the Internet Would