An increase in consumer expenditures during the holiday season,a decrease in purchases of U.S.goods by foreigners,a tax increase,and a decline in new home starts are examples of a(n):
A)monetary policy.
B)aggregate supply shock.
C)aggregate demand shock.
D)expectations.
E)None of the above.

Question

Quizplus · Accepted Answer

The given examples represent changes in aggregate demand, which is reflected in the total amount of goods and services that consumers and businesses are willing to purchase. Therefore, the correct choice is C, which refers to an aggregate demand shock. Monetary policy (A) refers to actions taken by the central bank to influence borrowing, lending, and spending. An aggregate supply shock (B) refers to changes in productivity or input costs that affect the ability of firms to produce goods and services. Expectations (D) refer to how individuals or businesses anticipate future economic conditions and make decisions based on those expectations. None of the above (E) is not a suitable answer as one of the choices is applicable.

An Increase in Consumer Expenditures During the Holiday Season,a Decrease