Assume an economy is in equilibrium at an output level of $2,000 billion. If government spending decreases by $500 billion, then at the output level of $2,000 billion, there is

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When government spending decreases, it leads to a reduction in aggregate demand. At the original output level of $2,000 billion, producers will find themselves with more goods than consumers are willing to buy, leading to an unplanned rise in inventories.

Assume an Economy Is in Equilibrium at an Output Level