CFA Practice Question

There are 539 practice questions for this study session.

CFA Practice Question

Which of the following will cause an increase in aggregate demand in the United States?
A. An increase in the real interest rate or a decrease in the stock market share prices
B. An increase in the pessimism of business and consumers about future economic conditions
C. An increase in the expected rate of inflation
Explanation: People will buy now before prices go higher. Thus, the expectation of an increase in the inflation rate will stimulate current aggregate demand.

User Contributed Comments 4

User Comment
hannovanwyk what about A? an increase in real interest rates, cause people to hold less money(savings) and thus spend more > therefore increasing aggregate demand.
campitos69 Not exactly. Think about it as an increase in the savings accounts int rate...likely, more people will choose to put more money into savings rather than spend
flpe1047 I know the question only asked about demand, but the effect on market equilibrium is uncertain, because an increase in expected inflation will also decrease supply. Workers will require higher wages and output will decrease at that level of labor.
gill15 Dont get this. In the notes it says that shifts in short run supply are caused by changes in future price expectation(Shifts it right).

so does that mean BOTH the AD and SRAS shift to the right,....it must but I did not read about this....or am i missing something....
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