Final answer:
A reduction in consumer confidence that causes aggregate demand to fall would cause a decrease in real GDP and, if large enough, a recession.
Step-by-step explanation:
In this scenario, a reduction in consumer confidence that causes aggregate demand to fall would cause a decrease in real GDP and, if large enough, a recession.
When consumer confidence is low, people are less likely to spend money on goods and services. As a result, aggregate demand decreases, leading to a decrease in real GDP. If this decrease in aggregate demand is significant enough, it can lead to a recession.
For example, during a recession, people may be worried about their job security and future financial stability, so they may cut back on spending and save more. This decrease in consumer spending can have a negative impact on businesses, leading to lower output, investments, and employment.