Question

During a recession, economies experience increased unemployment and a reduced level of activity. How would a recession be likely to affect the market demand for new cars?

• A. Demand will shift to the right
• B. Demand will shift to the left
• C. Demand will not shift, but the quantity of cars sold per month will decrease.
• D. Demand will not shift, but the quantity of cars sold per month will increase

Answer 1

The correct option is B

Demand will shift to the left

When people have less income to spend, they will reduce their consumption, making aggregate demand fall, and consequently, the demand curve will shift to the left.