Falling oil prices made consumers in Alberta very pessimistic about their future incomes.How will this increased pessimism affect the aggregate demand curve?
A)It will move the economy up along a stationary aggregate demand curve.
B)It will move the economy down along a stationary aggregate demand curve.
C)It will shift the aggregate demand curve to the left.
D)It will shift the aggregate demand curve to the right.
E)It will shift aggregate supply to the left.

Question

Quizplus · Accepted Answer

An increase in pessimism about future incomes will lead to a decrease in consumption and investment, which will shift the aggregate demand curve to the left. This means that at any given price level, the quantity demanded of goods and services will decrease, leading to a decrease in real GDP and employment.

Falling Oil Prices Made Consumers in Alberta Very Pessimistic About