Beginning in 2007, in addition to consumers experiencing a fall in wealth, consumers realized the economy was undergoing a downturn. The figure here shows the related Consumer Sentiment Index, which is a measure of consumers' confidence about their own financial situation and the future direction of the economy. The Consumer Sentiment Index began falling ahead of the recession and then fell significantly during 2008.

The following the figure depicts the aggregate demand curve (AD), the short-run aggregate supply curve (SRAS), and the long-run aggregate supply curve (LRAS) for the United States. The economy is initially in long-run equilibrium, at point A. In the figure below, shift the appropriate curve to depict the outcome of the fall in expected future income.