The figure given below depicts the macroeconomic equilibrium in a country. Figure 11.3 Suppose an economy is in equilibrium.Also suppose that consumer expectations change as the threat of war increases the likelihood of an increase in taxes.This would result in:
A)an increase in equilibrium income.
B)no change in equilibrium income.
C)a downward shift of the aggregate supply curve.
D)a decrease in equilibrium income.
E)a change in the slope of the aggregate supply curve.

Question

The figure given below depicts the macroeconomic equilibrium in a country. Figure 11.3  Suppose an economy is in equilibrium.Also suppose that consumer expectations change as the threat of war increases the likelihood of an increase in taxes.This would result in:
A)an increase in equilibrium income. 
B)no change in equilibrium income. 
C)a downward shift of the aggregate supply curve. 
D)a decrease in equilibrium income. 
E)a change in the slope of the aggregate supply curve.

Quizplus · Accepted Answer

The change in consumer expectations would likely lead to a decrease in consumption which would shift the aggregate demand curve to the left. This would result in a decrease in equilibrium income.

The Figure Given Below Depicts the Macroeconomic Equilibrium in a Country