A decrease in government spending will cause a(n):
A)increase in the quantity of real domestic output demanded.
B)decrease in the quantity of real domestic output demanded.
C)decrease in aggregate demand.
D)increase in aggregate demand.

Question

Quizplus · Accepted Answer

A decrease in government spending will decrease the amount of money flowing into the economy, causing a decrease in aggregate demand. This is because less government spending means less money going to households and businesses, which in turn reduces their ability to spend and invest. As a result, the overall demand for goods and services in the economy will decrease.

A Decrease in Government Spending Will Cause A(n)