If government spending decreases,which of the following would occur?
A) An increase in GDP,an increase in the price level,an increase in money demand,and an increase in the interest rate
B) An increase in GDP,a decrease in the price level,an increase in money demand,and a decrease in the interest rate
C) A decrease in GDP,a decrease in the price level,a decrease in money demand,and a decrease in the interest rate
D) A decrease in GDP,a decrease in the price level,an increase in money demand,and an increase in the interest rate
E) An increase in GDP,an increase in the price level,a decrease in money demand,and a decrease in the interest rate.

Question

Quizplus · Accepted Answer

A decrease in government spending typically leads to a decrease in GDP and the price level, as there is less overall demand in the economy. This reduction in demand also leads to a decrease in money demand and a decrease in the interest rate.

If Government Spending Decreases,which of the Following Would Occur