Question

Discuss how decreases in consumer confidence and pessimistic expectations by businesses affect the aggregate demand (AD) curve?

Answer 1

In this case the decrease in consumer confidence and Pessimistic Expectations by businesses affect the aggregate demand curve. It is true that businesses are highly affected by the decrease in consumer confidence and the negative approach of the consumers towards the demand, so here aggregate demand means the total demand of the economy, it includes the demand of household sector. The demand of industrial sector, demand of Government and the demand of rest of the world, where all the four sectors play a role of consumers in the economy so when there is a decrease in consumer confidence it means consumer are not so sure about weather to purchase the commodity or not.
In the market whether it is a household sector, industrial sector or government sector when consumer is also following a negative approach and negative Expectations and it is observed by the businesses then the overall aggregate demand curve shift downward for shift left word it means there is a downfall in the aggregate demand in the economy that's why it is important to always follow positivity of the consumer so that there will be no downward sloping a leftward shift of the aggregate demand in the economy.