The aggregate demand curve will shift to the left if
A) people are more optimistic about their future.
B) a reduction in the price level pushes down borrowing costs.
C) government expenditures increase.
D) the national incomes of our trading partners decrease.

Question

Quizplus · Accepted Answer

A decrease in the national incomes of our trading partners will lead to a decrease in their demand for our exports, causing a decrease in net exports, which shifts the aggregate demand curve to the left. Option A is incorrect as increased optimism will lead to an increase in consumer spending, causing the aggregate demand curve to shift right. Option B is incorrect as a reduction in the price level will increase consumer spending, causing the aggregate demand curve to shift right. Option C is incorrect as an increase in government spending will also cause the aggregate demand curve to shift right.

The Aggregate Demand Curve Will Shift to the Left If