Changes in aggregate demand
A)could be caused by changes in the spending decisions of foreigners.
B)are unlikely to change quickly in response to economic events.
C)are primarily based on changes in firms' abilities to produce products.
D)are not affected by changes in government policies.

Question

Quizplus · Accepted Answer

Changes in the spending decisions of foreigners, such as changes in their demand for exports, can affect aggregate demand. For example, if a country's exports decrease due to a recession in another country, this can lead to a decrease in aggregate demand for that country.

Option B is incorrect because aggregate demand can change quickly in response to economic events, such as changes in consumer confidence, government policies, or natural disasters.

Option C is incorrect because changes in aggregate demand are not primarily based on changes in firms' abilities to produce products, but rather on the level of demand for those products.

Option D is incorrect because changes in government policies, such as fiscal or monetary policy, can have a significant effect on aggregate demand.

Changes in Aggregate Demand