Question

In: Economics

a. In early 2001 investment spending sharply declined in the United States. This event caused a...

a. In early 2001 investment spending sharply declined in the United States. This event caused a

multiple choice 1

  • rightward shift in aggregate demand, and more investment would have caused a rightward shift in aggregate supply.

  • rightward shift in aggregate demand, and lower investment would have caused a leftward shift in aggregate supply.

  • leftward shift in aggregate demand, and lower investment would have caused a leftward shift in aggregate supply.

  • leftward shift in aggregate demand, and less investment would have caused a rightward shift in aggregate supply.

b. In the two months following the September 11, 2001, attacks on the United States, consumption also declined. This event caused a

multiple choice 2

  • rightward shift in aggregate demand, and lower investment would have caused a leftward shift in aggregate supply.

  • leftward shift in aggregate demand, and lower investment would have caused a leftward shift in aggregate supply.

  • rightward shift in aggregate demand, and more investment would have caused a rightward shift in aggregate supply.

  • leftward shift in aggregate demand, and less investment would have caused a rightward shift in aggregate supply.

Solutions

Expert Solution

ANSWER-

# Multiple choice 1- In early 2001 investment spending sharply declined in the United States

When the investment level decreases in a economy it causes the aggregate demand to fall and when aggregate demand fall the aggregate demand curve shifts to the left and less investment means less capacity to produce in the economy which decreases the supply and when supply decreases the supply curve shifts to the left.

Therefore, In early 2001 investment spending sharply declined in the United States. This event caused a leftward shift in aggregate demand, and lower investment would have caused a leftward shift in aggregate supply.

Hence, the answer is 3rd option - leftward shift in aggregate demand, and lower investment would have caused a leftward shift in aggregate supply.

# Multiple choice 2 -  In the two months following the September 11, 2001, attacks on the United States, consumption also declined

When the consupmtion decline it means that the spending by the consumer has decreased which causes the aggregate demand to fall and when aggregate demand falls the aggregate demand curve shifts to the left and the lower investment means the less capacity to produce which reduces the production level thereby causing the aggregate supply curve shifting to the left.

Therefore, In the two months following the September 11, 2001, attacks on the United States, consumption also declined  This event caused a leftward shift in aggregate demand, and lower investment would have caused a leftward shift in aggregate supply.

Hence, the answer is 2nd option - leftward shift in aggregate demand, and lower investment would have caused a leftward shift in aggregate supply.

Rahul Sunny answered 1 year ago
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