Pessimistic consumer expectations and decreased government spending are both associated with:
A)a downward movement along the aggregate demand curve.
B)an upward movement along the aggregate demand curve.
C)a leftward shift of the aggregate demand curve.
D)a rightward shift of the aggregate demand curve.
E)a steeper slope of the aggregate demand curve.

Question

Quizplus · Accepted Answer

Pessimistic consumer expectations and decreased government spending both decrease aggregate demand, causing a leftward shift of the aggregate demand curve. This results in a lower level of real GDP and potentially lower price levels. A movement along the aggregate demand curve would occur due to a change in price level, not consumer expectations or government spending. A shift to the right of the curve would occur due to factors that increase aggregate demand, such as an increase in consumer or government spending. A steeper slope of the aggregate demand curve would indicate a stronger negative relationship between price level and real GDP, but this is not directly related to consumer expectations or government spending.

Pessimistic Consumer Expectations and Decreased Government Spending Are Both Associated