The inauguration of a new President often increases the degree of optimism in business firms and households,causing Ap to
A)rise and IS to shift leftward.
B)fall and IS to shift leftward.
C)fall and IS to increase.
D)rise and IS to shift rightward.

Question

Quizplus · Accepted Answer

The inauguration of a new President often signals potential changes in economic policies, which can increase optimism among business and households, leading to higher levels of investment and consumption. This increase in optimism can lead to a rise in aggregate demand, causing the AD curve to shift rightward. In the short run, this increase in aggregate demand often leads to higher output and prices, causing the IS curve to shift rightward. Therefore, the correct choice is D - rise in Ap and IS shift rightward.

The Inauguration of a New President Often Increases the Degree