Figure 24-1

-Refer to Figure 24-1.Ceteris paribus,a decrease in households' expectations of their future income 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 24-1
 
-Refer to Figure 24-1.Ceteris paribus,a decrease in households' expectations of their future income 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 households' expectations of their future income would lead to a decrease in consumption and hence a decrease in aggregate demand. This shift would be represented by a movement from AD₂ to AD₁, as shown in the graph.

Figure 24-1 -Refer to Figure 24-1.Ceteris Paribus,a Decrease in Households' Expectations of in Households