Figure 17-1
-Refer to Figure 17-1. If the economy starts at c and 1, then in the short run, where does a decrease in government expenditures move the economy?

Question

Figure 17-1 
-Refer to Figure 17-1. If the economy starts at c and 1, then in the short run, where does a decrease in government expenditures move the economy?

Quizplus · Accepted Answer

A decrease in government expenditures reduces aggregate demand, shifting the AD curve leftward. This moves the economy from point 1 to point 3 on the AD-AS model, and from point c to point d on the Phillips curve, indicating lower output and higher unemployment in the short run.

Figure 17-1 -Refer to Figure 17-1. If the Economy Starts at C