Read the Business Investment, Net Exports, and the 2001 Recession application and use it as background information for this question. Suppose that households become nervous about the future and decide to increase their saving and decrease their consumption spending. How would this behavior shift the aggregate demand curve? Using the short-run aggregate supply curve, what will happen to prices and output in the short run? Based on what you read in the handout, did nervous consumers cause the 2001 recession?
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