-Refer to the above figure. If the relevant aggregate demand curve was AD₂, the government could do all of the following to close the existing gap EXCEPT
A)increase government spending on roads.
B)reduce marginal tax rates.
C)reduce corporate taxes.
D)reduce defense spending.

Question

-Refer to the above figure. If the relevant aggregate demand curve was AD₂, the government could do all of the following to close the existing gap EXCEPT
A)increase government spending on roads. 
B)reduce marginal tax rates. 
C)reduce corporate taxes. 
D)reduce defense spending.

Quizplus · Accepted Answer

Reducing defense spending would decrease aggregate demand further, widening the gap instead of closing it.

-Refer to the Above Figure