Which of the following decreases aggregate demand and shifts the AD curve leftward?
A)A decrease in government expenditures
B)A decrease in the price of exported goods and services
C)A decrease in potential GDP
D)A tax cut
E)A decrease in price level

Question

Quizplus · Accepted Answer

A decrease in government expenditures means the government is spending less, which reduces total spending in the economy and decreases aggregate demand, shifting the AD curve leftward.

Note: 
B is incorrect because a decrease in the price of exported goods and services leads to an increase in net exports, which increases overall aggregate demand, shifting the AD curve rightward.
C and D are also incorrect because they both increase aggregate demand and shift the AD curve rightward. 
E is incorrect because a decrease in price level, or deflation, can actually increase aggregate demand as consumers may hold off on spending in anticipation of even lower prices in the future.

Which of the Following Decreases Aggregate Demand and Shifts the AD