1. What effect would a decrease in consumer savings have on the aggregate demand curve?

The curve would level off.
The curve would shift to the right.
The curve would shift to the left.
The curve would not change

2. If there is an increase in aggregate supply with no corresponding increase in aggregate demand,

real GDP decreases, and the price level goes down.
real GDP increases, and the price level goes down.
real GDP decreases, and the price level goes up.
real GDP increases, and the price level goes up.

Take a shot, what do you think?

Hint. Draw a supply and demand graph. for 1) if consumers save less, they must be spending more. How is this represented with demand. For 2, if supply increases, what happens to P, what happens to Q?

1. A decrease in consumer savings would likely shift the aggregate demand curve to the left. When consumers save less, they have less income available to spend on goods and services, which reduces overall spending and therefore decreases aggregate demand. This shift represents a decrease in the total amount of goods and services demanded at each given price level, resulting in a leftward movement of the aggregate demand curve.

2. If there is an increase in aggregate supply with no corresponding increase in aggregate demand, real GDP increases, and the price level goes down. When aggregate supply increases, it means that businesses are producing more goods and services. However, if there is no increase in aggregate demand to match this increase in supply, there will be excess supply in the market. In order to sell this excess supply, businesses would need to lower prices, resulting in a decrease in the price level. Despite the decrease in prices, the increase in aggregate supply would lead to an increase in real GDP as more goods and services are being produced.

1. To determine the effect of a decrease in consumer savings on the aggregate demand curve, we need to examine how consumer spending impacts the economy. Consumer savings refer to the portion of income that individuals save instead of spending. When consumers save more, they have less money available for immediate spending, which can impact aggregate demand.

The aggregate demand curve represents the total demand for goods and services in an economy at different price levels. It is usually downward sloping because as prices decrease, consumers are willing and able to purchase more goods and services.

If there is a decrease in consumer savings, it means that consumers are spending more and saving less. This increased spending will lead to an increase in aggregate demand. As a result, the aggregate demand curve would shift to the right, indicating that at any given price level, the total demand for goods and services has increased.

Therefore, the correct answer would be: The curve would shift to the right.

2. An increase in aggregate supply with no corresponding increase in aggregate demand would result in a surplus of goods and services. To understand the effect on the economy, we need to analyze the relationship between changes in aggregate supply, real GDP (economic output), and the price level.

When aggregate supply increases, it means that businesses are able to produce more goods and services at every price level. If there is no corresponding increase in aggregate demand, there will be excess supply in the market. This excess supply leads to a decrease in prices as businesses may have to lower prices to sell their surplus output.

As a result, real GDP (economic output) would decrease because businesses are producing more than is demanded, leading to a decrease in economic activity. Additionally, the price level would also go down due to the excess supply and downward pressure on prices.

Thus, the correct answer would be: real GDP decreases, and the price level goes down.