Pessimism
Suppose the economy is in long-run equilibrium. Then because of corporate scandal, international tensions, and loss of confidence in policymakers, people become pessimistic regarding the future and retain that level of pessimism for some time.

-Refer to Pessimism.Which curve shifts and in which direction?
A)aggregate demand shifts right
B)aggregate demand shifts left
C)aggregate supply shifts right.
D)aggregate supply shifts left.

Question

Pessimism
Suppose the economy is in long-run equilibrium. Then because of corporate scandal, international tensions, and loss of confidence in policymakers, people become pessimistic regarding the future and retain that level of pessimism for some time.

-Refer to Pessimism.Which curve shifts and in which direction?
A)aggregate demand shifts right
B)aggregate demand shifts left
C)aggregate supply shifts right.
D)aggregate supply shifts left.

Quizplus · Accepted Answer

Pessimism will cause a decrease in consumer and investor confidence, leading to a decrease in aggregate demand. Therefore, the aggregate demand curve will shift leftward. There is no reason for the aggregate supply curve to shift in this scenario, so choices C and D can be ruled out. Additionally, choice A is incorrect because pessimism does not lead to an increase in aggregate demand.

Pessimism Suppose the Economy Is in Long-Run Equilibrium. Then Because of of Corporate