Question

If people's expectations about the future of the economy improve (for example, expect wages to go...

If people's expectations about the future of the economy improve (for example, expect wages to go up or for unemployment rates to fall), then the AD curve

A. will not change

B. will shift leftward

C. will shift rightward.

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

Answer : Option c) will shift rightward

When people's expectations about the future of the economy improve, like say higher wages in the future or lower unemployment rates in the future, what happens is that people tend to worry less about the future and they tend to save less in the present since they start feeling secure about the future of the economy.

Lower savings lead to higher consumption and thus consumption demand increase on an aggregate. This higher consumption demand then translates into a rightward shift of the AD (Aggregate Demand) curve.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Thinking about aggregate demand (AD) and aggregate supply (AS), we should expect fiscal policy that stresses...
Thinking about aggregate demand (AD) and aggregate supply (AS), we should expect fiscal policy that stresses active government policies to stabilize the economy would consider income taxes as leading to: A. A leftward shift in the AD curve. B. A rightward shift in the AD curve. C. All of the other answers are incorrect D. A rightward shift in the AS curve. E. A leftward shift in the AS curve. The APC can be described as: A. relationship between a...
For the questions use the following scenario: Consider an economy that abides by the standard classical...
For the questions use the following scenario: Consider an economy that abides by the standard classical model specifications. Suppose policy makers have decided to allow a large number of new immigrants to enter the country and join the workforce. In the labor market, we would expect to see A. a leftward shift in labor demand B. a rightward shift in labor demand C. a leftward shift in labor supply D. a rightward shift in labor supply For the production function,...
Do you expect consumer confidence and business expectations to improve in the months ahead? Which way...
Do you expect consumer confidence and business expectations to improve in the months ahead? Which way will the AD curve shift between now and the end on 2020? Why?
1. A cut in government spending, a decrease in income abroad, an increase in taxes, or...
1. A cut in government spending, a decrease in income abroad, an increase in taxes, or an expectation that future consumer income will fall will all cause aggregate: A) demand to shift rightward. B)demand to shift leftward. C)supply to shift rightward. D)supply to shift leftward. E) supply and aggregate demand to both shift equally inward. 2. A decrease in aggregate supply can result in: A) Unemployment B) demand- pull inflation C) prosperity D) cost- push inflation E) a recession 3.A...
There are two possible outcomes about the economy next year. We will have outcome A if...
There are two possible outcomes about the economy next year. We will have outcome A if there is a small increase in AD. We will have outcome B if there is a large increase in AD. Comparing the two outcomes, inflation in outcome A is ________ than that in outcome B; unemployment in outcome A is ________ than that in outcome B. higher; lower higher; higher lower; higher lower; lower Which of the following statements is incorrect? The LRPC shifts...
An increase in aggregate demand (AD) can cause a recession in the economy. an increase in...
An increase in aggregate demand (AD) can cause a recession in the economy. an increase in cyclical unemployment. an expansion in the economy. Flag this Question Question 22 pts Economic growth is shown in the AS-AD model as a leftward shift in the short run AS curve. rightward shift in the AD curve. rightward shift in the long run AS curve. Flag this Question Question 32 pts In the long run, the most important factor that shifts the aggregate supply...
What does an upsloping yield curve reveal about investor expectations? a) Market participants are expecting higher...
What does an upsloping yield curve reveal about investor expectations? a) Market participants are expecting higher rates in future and an expanding economy. b) Market participants are expecting lower rates in the future and a recession.
Eurozone unemployment rose to 10.7 percent. At the same? time, Eurozone inflation unexpectedly rose to 2.7...
Eurozone unemployment rose to 10.7 percent. At the same? time, Eurozone inflation unexpectedly rose to 2.7 percent a?year, up from the previous? month's 2.6 percent a year. ?Source: Huffington Post?, March? 1, 2012 A very high unemployment rate can be accounted for by the Phillips curve model by all of the following except?_______. A. a movement down along the? short-run Phillips curve if there is no change in the natural unemployment rate B. a rightward shift of the? long-run Phillips...
If the economy began at potential output when a negative aggregate demand shock hit, what would...
If the economy began at potential output when a negative aggregate demand shock hit, what would be the traditional monetary policy action to stabilize output? lower interest rates to increase spending and shift the AD curve to the right lower interest rates to increase spending and shift the AD curve to the left increase interest rates to increase spending and shift the AD curve to the right lower interest rates to decrease spending and shift the AD curve to the...
3) Which of the following occurs as the economy moves leftward along a given IS curve?...
3) Which of the following occurs as the economy moves leftward along a given IS curve? A) An increase in the interest rate causes investment spending to decrease. B) An increase in the interest rate causes money demand to increase. C) An increase in the interest rate causes a reduction in the money supply. D) A reduction in government spending causes a reduction in demand for goods. E) An increase in taxes causes a reduction in demand for goods. 5)...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT