Question

1. When consumers are more optimistic about future economic conditions, what happens to aggregate demand? a....

1. When consumers are more optimistic about future economic conditions, what happens to aggregate demand?

a. Aggregate demand stays the same.

b. Aggregate demand decreases.

c. Aggregate demand increases.

d. The effect is uncertain as it depends on other factors.

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Answer #2

ANSWER:

When consumers are more optimistic about future economic conditions. 'Aggregate demand increases'. Because when consumers feel more confident about the future of the economy,they tend to consume more.If business man have confidence than by investing more they can get high return on investment. On the otherhand its work viseversa no confidence spending decline.So due to rise in confidence is associated with higher consumption and investment so it tends to increase in aggregate demand.

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