The global financial panic in September 2008 led to a sharp fall in business investment spending and in consumer spending.How could these sharp falls be viewed?
A) as a sharp decrease in aggregate supply
B) as a sharp decrease in aggregate demand
C) as a sharp decrease in aggregate supply and in aggregate demand
D) as a modest increase in aggregate supply

Question

The global financial panic in September 2008 led to a sharp fall in business investment spending and in consumer spending.How could these sharp falls be viewed?  
A) as a sharp decrease in aggregate supply 
B) as a sharp decrease in aggregate demand 
C) as a sharp decrease in aggregate supply and in aggregate demand 
D) as a modest increase in aggregate supply

Quizplus · Accepted Answer

The sharp falls in both business investment spending and consumer spending indicate a decrease in demand, leading to a decrease in aggregate demand. Hence, the correct option is B.

The Global Financial Panic in September 2008 Led to a Sharp