Figure 24-1
-Refer to Figure 24-1.Ceteris paribus,a decrease in firms' expectations of the future profitability of investment spending 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 firms' expectations of the future profitability of investment spending 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 firms' expectations of future profitability of investment spending would lead to a decrease in investment demand, which would shift the AD curve to the left from AD1 to AD2. Therefore, the correct answer is B.

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