Consider the following news headline: "Canadian business leaders fear reduced world demand for commodities".Which of the following correctly describes the likely effect in our simple macro model?
A)the investment function shifts downward
B)the AE function shifts downward
C)the investment function shifts upward
D)the savings function shifts downward
E)both A and B are correct

Question

Quizplus · Accepted Answer

The headline suggests that businesses expect a decrease in demand for commodities, which will likely lead to a decrease in investment and a decrease in aggregate expenditure.

Consider the Following News Headline: "Canadian Business Leaders Fear Reduced