Which of the following will decrease aggregate expenditure in Canada?
A)a decrease in the value of the dollar
B)a decrease in the price level
C)a decrease in interest rates
D)a decrease in government purchases
E)a decrease in income taxes

Question

Quizplus · Accepted Answer

A decrease in government purchases directly reduces aggregate expenditure as government spending is a component of aggregate expenditure. The other options are likely to increase aggregate expenditure - a decrease in the value of the dollar makes exports cheaper and more attractive to foreign buyers, leading to an increase in net exports; a decrease in the price level encourages consumption and investment spending; a decrease in interest rates encourages borrowing and investment spending; a decrease in income taxes leaves households with more disposable income to spend.

Which of the Following Will Decrease Aggregate Expenditure in Canada