Which of the following scenarios will definitely cause the aggregate demand curve to shift to the left?

• A. An increase in government spending on infrastructure
• B. A reduction in interest rates by the central bank
• C. A rise in exports due to a weaker domestic currency
• D. A decrease in consumer confidence leading to lower household spending

Answer: (D)

Verified step by step guidance

1. Understand that the aggregate demand (AD) curve represents the total quantity of goods and services demanded across all levels of an economy at different price levels.
2. Recall that factors which increase overall spending (like government spending, lower interest rates, or higher exports) cause the AD curve to shift to the right, indicating higher demand at every price level.
3. Identify that a decrease in consumer confidence typically leads to lower household spending, which reduces consumption, a major component of aggregate demand.
4. Recognize that a reduction in consumption causes the aggregate demand curve to shift to the left, reflecting a decrease in total demand at every price level.
5. Conclude that among the given options, only a decrease in consumer confidence leading to lower household spending will definitely cause the aggregate demand curve to shift to the left.