In cases below, answer how the aggregate demand curve would shift: Leftward, Rightward, or No shift....

In cases below, answer how the aggregate demand curve would shift: Leftward, Rightward, or No shift.

a. Consumers became pessimistic about future:

b. Firms became more bullish about future

: c. Government changed its suppliers from foreign ones to domestic ones:

Expert Solution

(a) when consumers became more pessimistic about the future then the aggregate demand curve will shift to the left. This is because they will loose confidence and spending on consumption and investment will decline.

(b) when firms became more bullish which means they became optimistic about the future then aggregate demand curve will shift to the right. This is because of the increased investment. More investment results in more production of goods and services and there will be more demand of goods and services

(c) when government changed suppliers from foreign to domestic ones then there are various factors which affect the demand. If domestic suppliers are relatively cheaper then the consumers will have to pay less price than before.As a result aggregate demand curve will shift to the right. But if government changed suppliers just to protect the domestic suppliers then there might me no shift in agreement demand curve.

Rahul Sunny answered 8 months ago

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