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A decrease in government spending would cause (a) the aggregate demand curve to shift to the right. (b) the aggregate demand curve to shift to the left. (c) a movement down and to the right along the aggregate demand curve. (d) a movement up and to the left along the aggregate demand curve.?
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A decrease in government spending would cause (a) the aggregate demand...
Answer:
Effect of Decrease in Government Spending on Aggregate Demand Curve
The correct answer is (b) the aggregate demand curve to shift to the left.
Explanation:
Government spending is one of the components of aggregate demand (AD). The AD curve shows the relationship between the price level and the quantity of real GDP demanded by households, firms, and the government. A decrease in government spending will have an impact on the AD curve in the following ways:
1. Shift to the Left:
A decrease in government spending will shift the AD curve to the left. This is because the reduction in government spending will lead to a decrease in aggregate demand. This means that at any given price level, the quantity of real GDP demanded will be lower than before the decrease in government spending.
2. Movement down and to the right along the AD curve:
If there is a movement down and to the right along the AD curve, it means that there has been a decrease in the price level. This could happen if there is a decrease in government spending, but it depends on other factors as well. If the decrease in government spending is accompanied by an increase in other components of AD (such as consumption or investment), then the AD curve may not shift to the left, but instead, there may be a movement down and to the right along the curve.
3. Movement up and to the left along the AD curve:
If there is a movement up and to the left along the AD curve, it means that there has been an increase in the price level. This is not likely to happen if there is a decrease in government spending. In fact, a decrease in government spending is likely to lead to a decrease in the price level, which will shift the AD curve to the left.
Conclusion:
Therefore, a decrease in government spending will cause the aggregate demand curve to shift to the left. This will lead to a decrease in the quantity of real GDP demanded at any given price level.
Effect of Decrease in Government Spending on Aggregate Demand Curve
The correct answer is (b) the aggregate demand curve to shift to the left.
Explanation:
Government spending is one of the components of aggregate demand (AD). The AD curve shows the relationship between the price level and the quantity of real GDP demanded by households, firms, and the government. A decrease in government spending will have an impact on the AD curve in the following ways:
1. Shift to the Left:
A decrease in government spending will shift the AD curve to the left. This is because the reduction in government spending will lead to a decrease in aggregate demand. This means that at any given price level, the quantity of real GDP demanded will be lower than before the decrease in government spending.
2. Movement down and to the right along the AD curve:
If there is a movement down and to the right along the AD curve, it means that there has been a decrease in the price level. This could happen if there is a decrease in government spending, but it depends on other factors as well. If the decrease in government spending is accompanied by an increase in other components of AD (such as consumption or investment), then the AD curve may not shift to the left, but instead, there may be a movement down and to the right along the curve.
3. Movement up and to the left along the AD curve:
If there is a movement up and to the left along the AD curve, it means that there has been an increase in the price level. This is not likely to happen if there is a decrease in government spending. In fact, a decrease in government spending is likely to lead to a decrease in the price level, which will shift the AD curve to the left.
Conclusion:
Therefore, a decrease in government spending will cause the aggregate demand curve to shift to the left. This will lead to a decrease in the quantity of real GDP demanded at any given price level.
Community Answer
A decrease in government spending would cause (a) the aggregate demand...
B
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A decrease in government spending would cause (a) the aggregate demand curve to shift to the right. (b) the aggregate demand curve to shift to the left. (c) a movement down and to the right along the aggregate demand curve. (d) a movement up and to the left along the aggregate demand curve.?
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A decrease in government spending would cause (a) the aggregate demand curve to shift to the right. (b) the aggregate demand curve to shift to the left. (c) a movement down and to the right along the aggregate demand curve. (d) a movement up and to the left along the aggregate demand curve.? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about A decrease in government spending would cause (a) the aggregate demand curve to shift to the right. (b) the aggregate demand curve to shift to the left. (c) a movement down and to the right along the aggregate demand curve. (d) a movement up and to the left along the aggregate demand curve.? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A decrease in government spending would cause (a) the aggregate demand curve to shift to the right. (b) the aggregate demand curve to shift to the left. (c) a movement down and to the right along the aggregate demand curve. (d) a movement up and to the left along the aggregate demand curve.?.
A decrease in government spending would cause (a) the aggregate demand curve to shift to the right. (b) the aggregate demand curve to shift to the left. (c) a movement down and to the right along the aggregate demand curve. (d) a movement up and to the left along the aggregate demand curve.? for CA Foundation 2024 is part of CA Foundation preparation. The Question and answers have been prepared according to the CA Foundation exam syllabus. Information about A decrease in government spending would cause (a) the aggregate demand curve to shift to the right. (b) the aggregate demand curve to shift to the left. (c) a movement down and to the right along the aggregate demand curve. (d) a movement up and to the left along the aggregate demand curve.? covers all topics & solutions for CA Foundation 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for A decrease in government spending would cause (a) the aggregate demand curve to shift to the right. (b) the aggregate demand curve to shift to the left. (c) a movement down and to the right along the aggregate demand curve. (d) a movement up and to the left along the aggregate demand curve.?.
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