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) a decrease; an increase
B) an increase; a decrease
C) an increase; an increase
D) a decrease; a decrease

Question

Quizplus · Accepted Answer

A decrease in government expenditures shifts the aggregate demand curve to the left, leading to a decrease in both real GDP and the price level.

Suppose That the Government Decreases Its Expenditures on Goods and Services