The recession of 2008-2009 made many firms pessimistic about the future profitability of investments.How does this increased pessimism affect the aggregate demand curve?
A)This will move the economy up along a stationary aggregate demand curve.
B)This will move the economy down along a stationary aggregate demand curve.
C)This will shift the aggregate demand curve to the left.
D)This will shift the aggregate demand curve to the right.
E)This will shift the aggregate supply curve to the right.

Question

Quizplus · Accepted Answer

Increased pessimism about future profitability of investments will reduce the willingness of firms to make investments, which in turn will lead to a decrease in consumption and aggregate demand. Therefore, the aggregate demand curve will shift to the left.

The Recession of 2008-2009 Made Many Firms Pessimistic About the Future