A decrease in government spending will cause
A)AD to increase (move to the right).
B)AD to decrease (move to the left).
C)AS to increase (move to down and to the right).
D)AS to decrease (move to up and to the left).

Question

Quizplus · Accepted Answer

A decrease in government spending will lead to a decrease in overall aggregate demand (AD) in the economy. This is because government spending is a component of AD, and a decrease in government spending will mean there is less spending in the economy, resulting in a leftward shift of the AD curve.

A Decrease in Government Spending Will Cause