An increase in money supply if the confidence of consumer fall then
Answers
Answer:
One of several specific aggregate demand determinants assumed constant when the aggregate demand curve is constructed, and which shifts the aggregate demand curve when it changes. An increase in consumer confidence causes an increase (rightward shift) of the aggregate demand curve. A decrease in consumer confidence causes a decrease (leftward shift) of the aggregate demand curve. Other notable aggregate demand determinants include interest rates, federal deficit, inflationary expectations, and the money supply.
Explanation:
An increase in consumer confidence causes an increase (rightward shift) of the aggregate demand curve. A decrease in consumer confidence causes a decrease (leftward shift) of the aggregate demand curve. ... If buyers find that they "like" a good more, then their demand increases.
More Confident
Suppose, for example, that the economy has been growing steadily for a couple of years. Real production is expanding. Unemployment is down. Inflation is low. Life is good. And, of some importance, the public trusts that the President, Congress, and the Federal Reserve System will NOT do anything disruptive. Perhaps the country has just won a war or achieved another major accomplishment like landing on the moon.
In this case, consumer confidence is bound to increase. The household sector is thus inclined to spend freely, especially on durable goods like cars, houses, furniture, and appliances. The result is that this increase in consumer confidence causes an increase in consumption expenditures and subsequently an increase aggregate demand.
To see how a boost in consumer confidence affects the aggregate demand curve, click the [More Confident] button. The increase in consumer confidence triggers an increase in aggregate demand, which is a rightward shift of the aggregate demand curve.
Less Confident
Alternatively, the household sector might begin to lose confidence in the economy if signs of trouble emerge. For example, the growth rate of real production might taper off. The unemployment rate might rise a bit. Perhaps the Chairman of the Federal Reserve System proclaims that the continued expansion is soon to end. Maybe Congress and the President have been negotiating a big tax increase. It might be that political scandal has besieged government.
In this case, consumer confidence is likely to decrease. The household sector is thus inclined to spend less freely, especially reducing expenditures on durable goods, such as cars, houses, furniture, and appliances. Rather than spending as much, they save a little more... just in case! The result of this decrease in consumer confidence is a decrease in consumption expenditures and subsequently a decrease aggregate demand.
To see how a decline in consumer confidence affects the aggregate demand curve, click the [Less Confident] button. The decrease in consumer confidence triggers a decrease in aggregate demand, which is a leftward shift of the aggregate demand curve.