During 2008 in the United States,consumer confidence fell significantly.Which of the following will occur as a result of this reduction in consumer confidence?

Question

Quizplus · Accepted Answer

A reduction in consumer confidence would lead to a decrease in consumption expenditure. This would shift the IS (investment-saving) curve leftward, as the level of output and interest rates needed to maintain equilibrium in the goods and money markets would be lower than before. There is no reason to expect a shift in the LM (liquidity preference-money supply) curve, as the supply of money is usually considered to be controlled by the central bank rather than influenced by changes in consumer sentiment.

During 2008 in the United States,consumer Confidence Fell Significantly