Which of the following will happen if aggregate consumption in an economy falls?
A) Real output will fall.
B) Labor supply will fall.
C) Government expenditure will fall.
D) Unemployment will fall.

Question

Quizplus · Accepted Answer

Aggregate consumption is an important component of Aggregate Demand (AD) in an economy. If aggregate consumption falls, it will lead to a decrease in AD, causing firms to produce less output in response to lower demand. Therefore, real output will fall. The other options do not necessarily follow from a decrease in aggregate consumption.

Which of the Following Will Happen If Aggregate Consumption in an Economy