Suppose that the government decreases its expenditures on goods and services. Within the AS- AD
Model, the result will be in real GDP and in the price level.
A) an increase; an increase
B) a decrease; an increase
C) a decrease; a decrease
D) an increase; a decrease

Question

Quizplus · Accepted Answer

A decrease in government expenditures on goods and services will lead to a leftward shift in the aggregate demand (AD) curve, resulting in a decrease in both real GDP and the price level within the AS-AD model.

Suppose That the Government Decreases Its Expenditures on Goods and Services