Question

If there was a decrease in consumer savings due to an increase in consumer spending with no increase in the money released into circulation what will happen to the aggregate demand curve

Answer 1

A decrease in consumer savings due to an increase in consumer spending, without an increase in the money supply, would result in a decrease in the aggregate demand curve.

Step-by-step explanation:

If there is a decrease in consumer savings due to an increase in consumer spending with no increase in the money released into circulation, it would result in a decrease in aggregate demand. This is because aggregate demand is determined by factors such as consumption, investment, government spending, and net exports. When consumer savings decrease, it means there is less money available for spending, leading to a decrease in overall demand for goods and services.

For example, let's say that consumers decide to spend more on vacations and luxury items instead of saving money. This leads to decreased savings and less money available for other spending. As a result, businesses may start experiencing a decline in sales, leading to a decrease in production and employment. This decrease in consumer spending would shift the aggregate demand curve to the left.

In conclusion, a decrease in consumer savings due to an increase in consumer spending, without an increase in the money supply, would result in a decrease in the aggregate demand curve.

Answer 2

The aggregate demand curve will also decrease. If supply is not high and there is no circulating income or monetary value that's happening in a particular market, then the demand of consumers will also go down. This is because the need for production is no longer necessary because there will be no consumers to purchase goods and services from the market.