Which direction would each changes in conditions causee the aggregate demand curve to shift. Explain answers.

Question

A) Consumers expect an economic downturn.

B) A new U.S. president is elected, and the profit expectations of business executives rise.

C) The federal government increases spending for highways, bridges, and other infrastructure.

D) The United States increases exports of wheat and other crops to Russia, Ukraine, and other former Soviet republics.

Answer 1

A) Saving might increase (due to expectation of lower incomes) leading to less consumption, thus aggregate demand may fall (leftward shift)

B) This may lead to increase in investments, thus rightward shift of AD.

C) This may lead to increase in investments, thus rightward shift of AD.

D) In general this will leave aggregate demand unaffected - though it may increase disposable income (if sold for very profitable price) - thus will shift AD right. Plus higher gains from international trade and specialization increase PPC.