Suppose that the U.S government decreases its mandatory spending on goods and services. This policy will:
A) shift the aggregate demand curve to the right.
B) shift the aggregate demand curve to the left.
C) lead to a movement along the aggregate demand curve.
D) have no effect on the aggregate demand curve.

Question

Quizplus · Accepted Answer

A decrease in government spending on goods and services reduces the overall demand in the economy, leading to a leftward shift in the aggregate demand curve. This is because government spending is a component of aggregate demand, and reducing it directly decreases the total spending in the economy.

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