Starting from potential output, if consumer confidence increases and consumers decide to spend more, then this will shift the ______ curve to the right and generate ______.
A)aggregate demand; a recessionary output gap
B)aggregate supply; a recessionary output gap
C)aggregate demand; an expansionary output gap
D)aggregate supply; an expansionary output gap

Question

Quizplus · Accepted Answer

An increase in consumer confidence leads to higher consumer spending, which shifts the aggregate demand curve to the right, resulting in an expansionary output gap as actual output exceeds potential output.

Starting from Potential Output, If Consumer Confidence Increases and Consumers