Multiple Choice
Which of the following best describes the effect of a war fought on home soil on a country's long-run aggregate supply (LRAS)?
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1. Introduction to Macroeconomics
Introduction to Economics
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Which of the following will shift the aggregate demand curve to the left?
A
A decrease in consumer confidence
B
An increase in government spending
C
A reduction in interest rates
D
A rise in exports
Verified step by step guidance1
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.
Recall that factors which increase overall spending in the economy shift the AD curve to the right, while factors that decrease overall spending shift it to the left.
Analyze each option: a decrease in consumer confidence typically reduces consumer spending, which lowers aggregate demand and shifts the AD curve to the left.
An increase in government spending, a reduction in interest rates, and a rise in exports all tend to increase aggregate demand, shifting the AD curve to the right.
Therefore, identify the option that decreases aggregate demand (a decrease in consumer confidence) as the factor that shifts the AD curve to the left.
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