Suppose that the price of stocks (i.e., households\' assets) increases dramatica

Question

Suppose that the price of stocks (i.e., households' assets) increases dramatically. Which of the following is most likely to occur?

There is a movement down the aggregate demand curve.

The aggregate demand curve shifts to the left.

There is a movement up the aggregate demand curve.

The aggregate demand curve shifts to the right.

There is a movement down the aggregate demand curve.

The aggregate demand curve shifts to the left.

There is a movement up the aggregate demand curve.

The aggregate demand curve shifts to the right.

Explanation / Answer

A. There is a movement down the aggregate demand curve.

Increase in price will decrease quantity demanded of stocks hence downward movement along same AD curve.

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