A decrease in government purchases shifts the _ Curve to the _

A decrease in government purchases shifts the _______ Curve to the _______

Select one

a. aggregate demand; left

b. aggregate supply: left

c. aggregate demands right

d. aggregate supply right

Solutions

Expert Solution

Option A

The government spending is the important component of aggregate demand in the economy. Further, it can influence the aggregate demand through the multiplier effect it creates in the market.
If the government decreases its spending then it will affect the AD curve negatively and it will shift to the left. This will also lower the GDP in the economy.
Conversely, any increase in the government spending will shift the aggregate demand curve to right and that will boost the economic activity.

Rahul Sunny answered 1 year ago

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