Figure 15-1

-Refer to Figure 15-1.Ceteris paribus,a decrease in firms' expectations of the future profitability of investment spending would be represented by a movement from
A) AD₁ to AD₂.
B) AD₂ to AD₁.
C) point A to point B.
D) point B to point A.

Question

Figure 15-1
 
-Refer to Figure 15-1.Ceteris paribus,a decrease in firms' expectations of the future profitability of investment spending would be represented by a movement from
A) AD₁ to AD₂. 
B) AD₂ to AD₁. 
C) point A to point B. 
D) point B to point A.

Quizplus · Accepted Answer

A decrease in firms' expectations of the future profitability of investment spending would lead to a decrease in investment spending, which would shift the aggregate demand curve to the left. Therefore, the movement would be from AD₁ to AD₂.

Figure 15-1 -Refer to Figure 15-1.Ceteris Paribus,a Decrease in Firms' Expectations of in Firms