What effect would a reduction in business expectations,combined with the imposition of new tariffs by major trading partners,have on aggregate demand (AD)?
A)AD would decrease.
B)AD would stay the same.
C)AD would increase.
D)AD could either increase or decrease, depending on which change was of a greater magnitude.

Question

Quizplus · Accepted Answer

A reduction in business expectations would lead to a decrease in investment and consumer spending, both of which are components of aggregate demand. Additionally, the imposition of new tariffs by major trading partners would increase the cost of imported goods, leading to a further decrease in consumer spending. As a result, aggregate demand would decrease.

What Effect Would a Reduction in Business Expectations,combined with the Imposition