35. Refer to the figure. If the aggregate demand curve shifts from AD2 to AD1, the multiplier effect on real GDP will be a decrease from

A. Q3 to Q1.
B. Q2 to Q4.
C. Q2 to Q1.
D. Q3 to Q4.

Question

35. Refer to the figure. If the aggregate demand curve shifts from AD2 to AD1, the multiplier effect on real GDP will be a decrease from

A.  Q3 to Q1.
B.  Q2 to Q4.
C. Q2 to Q1.
D. Q3 to Q4.

BlackTom AI · Accepted Answer

This question asks us to analyze how a leftward shift in the aggregate demand curve (from AD2 to AD1) affects the equilibrium level of real GDP, as depicted in the accompanying graph.
Option A: Q3 to Q1. In the graph, the initial equilibrium with AD2 appears at the higher GDP level near Q3, while the new equilibrium after the leftward shift to AD1 occurs at the lower GDP level near Q1. This represents a decrease in real GDP from the higher point Q3 to the lower point Q1. The logic aligns with the idea that a contraction in aggregate demand reduces overall output.
Option B: Q2 to Q4. Moving from Q2 to Q4 would be a leftward shift in GDP from a middle-right position to a far-left position on the axis. However, the shift from AD2 to AD1, according to the diagram, does not move the equilibrium that far left; the new intersection with AS occurs closer to Q1 rather than Q4. Thus this choice exaggerates the magnitude of the decrease.
Option C: Q2 to Q1. This path indicates a decrease from a mid-right GDP to a leftward GDP near Q1, which is plausible in direction, but we must match the graph’s actual intersection points. The diagram suggests the new equilibrium after the AD4 shift sits around Q1 rather than exactly from Q2 down to Q1; while directionally similar, the specific endpoints matter for a precise answer.
Option D: Q3 to Q4. This would imply a smaller leftward movement than what the graph shows, moving from the higher GDP near Q3 to a position near Q4. The new equilibrium, given the leftward shift, is depicted further left than Q4 or at least not shy of Q4, depending on the scale. In many interpretations of this graph, the shift to AD1 places equilibrium well left of Q3, not merely to Q4.
Overall, the key idea is that a leftward shift of the AD curve lowers the equilibrium level of real GDP, and the diagram depicts the reduction from the high GDP at Q3 (with AD2) to a much lower GDP near Q1 (with AD1). The most consistent option with that movement is the one describing a decline from Q3 to Q1, reflecting the larger, net contraction in output rather than a milder one.

ECNM1115.32542.202530 Macroeconomics Spring 2025 Final

35. Refer to the figure. If the aggregate demand curve shifts from AD2 to AD1, the multiplier effect on real GDP will be a decrease from A. Q3 to Q1. B. Q2 to Q4. C. Q2 to Q1. D. Q3 to Q4.

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