Question

If businesses buy fewer capital goods, and nothing else changes, then total expenditures on U.S. goods and services (TE) will decrease. And if TE decreases, then _ will decrease; consequently, the _ curve will shift _.
a. aggregate demand (AD); AD; rightward

b. short-run aggregate supply (SRAS); SRAS; leftward

c. aggregate demand (AD); AD; leftward

d. interest rates; AD; leftward

e. prices; AD; rightward

Answer 1

Answer: C. Aggregate demand (AD); AD; leftward

Explanation:

If the expenditure decreases then the aggregate demand also decreases because you are not spending therefore, the output would decrease resulting in a decrease in aggregate demand. When the AD decreases, the AD curve will shift leftward. Demand curve shifts leftwards when there is a decrease in quantity and moves to the right when there is an increase in demand. The law of quantity demanded states there is an inverse relationship between price and output and when there is a leftward shift of the demand curve it means that the output has decreased from an increase in price.