Which of the following policies shifts the AD curve the farthest leftward?

Question

Quizplus · Accepted Answer

A decrease in government expenditure of $10 billion directly decreases aggregate demand (AD) by $10 billion. This shift is the farthest leftward shift possible among the given policy options. A cut in taxes of $10 billion or a decrease in both government expenditure and taxes of $10 billion would also shift the AD curve leftward but to a lesser extent. A rise in taxes of $10 billion would shift the AD curve leftward, but to a lesser extent than a decrease in government expenditure.

Which of the Following Policies Shifts the AD Curve the Farthest