A reduction in business expectations, combined with the imposition of new tariffs by major trading partners, would have what effect on aggregate demand?
A)AD would increase.
B)AD would decrease.
C)AD would stay the same.
D)AD could either increase or decrease, depending on which change was of a greater magnitude.

Question

A reduction in business expectations, combined with the imposition of new tariffs by major trading partners, would have what effect on aggregate demand?
A)​AD would increase.
B)​AD would decrease.
C)​AD would stay the same.
D)​AD could either increase or decrease, depending on which change was of a greater magnitude.

Quizplus · Accepted Answer

A reduction in business expectations would lower investment spending, which is a component of aggregate demand. Additionally, the imposition of new tariffs would increase costs for businesses and consumers, reducing their purchasing power and decreasing consumption spending. Therefore, both changes would result in a decrease in aggregate demand.

A Reduction in Business Expectations, Combined with the Imposition of New