Which of the following describes the process through which a major decline in the stock market leads to a change in aggregate demand?
A) Banking panics lead to the removal of deposit insurance and a negative AD shock.
B) Increases in net exports generate a negative AD shock.
C) Reductions in consumer wealth produce a negative AD shock.
D) A stock market bubble bursts,and this leads to a negative supply shock.

Question

Quizplus · Accepted Answer

When the stock market declines, people's wealth in stocks decrease which in turn reduces their confidence and ability to spend. As a result, consumer spending decreases, leading to a shift left in the aggregate demand curve.

Which of the Following Describes the Process Through Which a Major