Refer to the information provided in Figure 28.7 below to answer the question(s) that follow. Figure 28.7
-Refer to Figure 28.7. Suppose the economy is at Point A and the cost of inputs is fixed. A decrease in government spending could move the economy to Point

Question

Refer to the information provided in Figure 28.7 below to answer the question(s) that follow.  Figure 28.7
-Refer to Figure 28.7. Suppose the economy is at Point A and the cost of inputs is fixed. A decrease in government spending could move the economy to Point

Quizplus · Accepted Answer

A decrease in government spending would shift the aggregate demand curve to the left. Since the economy is at full employment at Point A, the leftward shift in aggregate demand would result in a decrease in output (real GDP) and a decrease in price level. The new equilibrium point after the decrease in government spending would be Point B.

Refer to the Information Provided in Figure 28