With an upward-sloping AS curve,a decrease in transfer payments can lead to a decrease in inflation.

Question

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When transfer payments decrease, people have less disposable income, which decreases aggregate demand and puts downward pressure on prices, leading to a decrease in inflation. With an upward-sloping AS curve, a decrease in aggregate demand causes a decrease in the price level and an increase in real output, resulting in a movement up along the AS curve.

With an Upward-Sloping AS Curve,a Decrease in Transfer Payments Can