The impact of a natural disaster on consumers in the economy can make them very pessimistic about their future incomes. How would an increase in pessimism affect the aggregate demand curve?
A)This will move the economy up along a stationary aggregate demand curve.
B)This will move the economy down along a stationary aggregate demand curve.
C)This will shift the aggregate demand curve to the left.
D)This will shift the aggregate demand curve to the right.

Question

Quizplus · Accepted Answer

An increase in pessimism will lead consumers to reduce their spending and increase their savings, which will decrease aggregate demand. This will shift the aggregate demand curve to the left.

The Impact of a Natural Disaster on Consumers in the Economy