One News Wire article in the text says,"After years of living happily beyond their means,Americans are finally facing financial reality." Ceteris paribus,a decrease in consumer spending will result in:

Question

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A decrease in consumer spending will lead to a decrease in the aggregate demand, which will result in a leftward shift of the aggregate demand curve. This shift will lead to lower output and prices in the economy, and it will reduce the overall level of economic activity. Therefore, it is the best choice. A is incorrect because a decrease in consumer spending will not necessarily lead to an increase in the marginal propensity to save (MPS). B is incorrect because a rightward shift of the aggregate supply curve would result in more output at lower prices, but this is not likely to happen due to a decrease in consumer spending. D is incorrect because there is no indication that taxes will increase as a result of the decrease in consumer spending.

One News Wire Article in the Text Says,"After Years of Living