Using the AD-AS model, if consumers and business become more optimistic about the future direction of the economy and increase spending, then:
A) aggregate demand will decrease.
B) aggregate demand will increase.
C) long-run aggregate supply will increase.
D) long-run aggregate supply will decrease.

Question

Quizplus · Accepted Answer

Consumers and businesses becoming more optimistic and increasing their spending will lead to an increase in aggregate demand, as there will be more demand for goods and services in the economy. This can result in an increase in production and employment in the short run, but may also lead to an increase in prices in the long run.

Using the AD-AS Model, If Consumers and Business Become More