Identify four changes in the economy that would cause the ...

[dbose]

Identify four changes in the economy that would cause the aggregate demand curve to decrease (shift to the left).

Question 2

Discretionary fiscal policy is best defined as:
 a. the deliberate change in tax laws and government spending to change equilibrium income.
  b. the deliberate manipulation of the money supply to expand the economy.
  c. the arbitrary fluctuation in tax laws and budget requirements.
  d. the automatic change in certain fiscal instruments when real GDP changes.
  e. the policy action taken by the Congress to reduce the federal budget deficit.

[kaylee05]

Answer to Question 1

The aggregate demand curve might be shifted to the left (a decrease) because of a decrease in consumption spending because of higher income taxes, a fall in consumer confidence or a reduced stock market wealth. Aggregate demand could also shift left if investment decreased due to higher real interest rates or a pessimistic economic outlook. Aggregate demand could also be decreased through a reduction in government purchases, or transfer payments. If net exports fell, this would also decrease aggregate demand.

Answer to Question 2

a