How does a decrease in government spending affect the aggregate expenditure line?
A)It shifts the aggregate expenditure line upward.
B)It shifts the aggregate expenditure line downward.
C)It increases the slope of the aggregate expenditure line.
D)It decreases the slope of the aggregate expenditure line.
E)It has no effect on the aggregate expenditure line.

Question

Quizplus · Accepted Answer

A decrease in government spending would lead to a decrease in government purchases (one of the components of aggregate expenditure). This decrease in government purchases would shift the aggregate expenditure line downward, as the total amount of spending in the economy has decreased.

How Does a Decrease in Government Spending Affect the Aggregate