Starting from potential output, if firms become less optimistic about the future and decide to decrease their investment in new capital, then this will shift the curve to the left and generate . Group of answer choices Aggregate demand; a recessionary output gap Aggregate supply; a recessionary output gap Aggregate demand; an expansionary output gap Aggregate supply; an expansionary output gap

Option A (aggregate demand; a recessionary output gap) is the right choice.

Explanation:

The overall production volume again for desired items and products that form the gross national product. The amount of money supply, government expenditures, social spending, including private consumption seems to be the aggregate demand. As investment drops significantly, AD further decreases and therefore also sometimes shifts. Owing to the whole total performance would become less than that of productive capacity. So, this clearly shows a recessionary annual deficit.

The other options offered are not relevant to the scenario presented. So, the solution above is the right one.