Aggregate demand decreases when
A) businesses come to expect higher profits in the future.
B) the government implements monetary policies that decrease the quantity of money.
C) incomes in foreign countries increase.
D) the government cuts taxes.

Question

Quizplus · Accepted Answer

When the government implements monetary policies that decrease the quantity of money, it leads to a decrease in consumer spending as people have less money to spend. This decreases aggregate demand.

Note: Choices A, C, and D could potentially affect aggregate demand, but the question specifically asks for the option that results in a decrease in aggregate demand. A and D could potentially increase aggregate demand, while C may have no impact or could potentially increase or decrease aggregate demand depending on the specific circumstances.

Aggregate Demand Decreases When