If firms' expectations about the future become pessimistic so that they think future profits will be lower,then
A)aggregate demand decreases and the AD curve shifts leftward.
B)aggregate demand increases and the AD curve shifts rightward.
C)the quantity of real GDP demanded decreases,and there is a movement up along the AD curve.
D)the quantity of real GDP demanded increases,and there is a movement down along the AD curve.
E)the aggregate demand curve does not shift,but potential GDP decreases.

Question

Quizplus · Accepted Answer

If firms expect lower future profits, they will likely reduce investment and hiring, leading to a decrease in consumer spending and a decrease in aggregate demand. This will shift the AD curve leftward, indicating a lower quantity of real GDP demanded at any given price level.

If Firms' Expectations About the Future Become Pessimistic So That