Figure 24-1
-Refer to Figure 24-1.Ceteris paribus,a decrease in households' expectations of their future income would be represented by a movement from
A)AD1 to AD2.
B)AD2 to AD1.
C)point A to point B.
D)point B to point A.

Question

Figure 24-1 
-Refer to Figure 24-1.Ceteris paribus,a decrease in households' expectations of their future income would be represented by a movement from
A)AD1 to AD2. 
B)AD2 to AD1. 
C)point A to point B. 
D)point B to point A.

Quizplus · Accepted Answer

A decrease in households' expectations of their future income would lead to a decrease in consumption spending and, therefore, a decrease in aggregate demand. This would be represented by a leftward shift of the AD curve, from AD1 to AD2. Therefore, the correct choice is option B.

Figure 24-1 -Refer to Figure 24-1.Ceteris Paribus,a Decrease in Households' Expectations of Households