3) What factors on the Consumer Spending side of the Y = C + G +...

3) What factors on the Consumer Spending side of the Y = C + G + I + NX shifts aggregate demand to the left?

4) What factors on the Government Spending side of the Y = C + G + I + NX shifts aggregate demand to the right?

5) What factors on the Investment Spending side of the Y = C + G + I + NX shifts aggregate demand to the left?

Expert Solution

3) Consumer may expect a pessimistic market environment, a stock market shock / wealth shock such as a stock market crash, decrease in future prices, expected increases in taxes in future, etc. These factors discourage consumption now and shifts AD to the left

4) Tax cuts, increased government spending and increased transfer payment can shift the AD curve to the right

5) Rise in the rate of interest, repeal of investment tax credit, decreased future profitability, lower investment opportunities in future, poor market environment, upcoming recession, all discourage investment and shift AD to the left.

Rahul Sunny answered 2 years ago

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