Which of the following sets of events clearly would lead to a decrease in aggregate demand if the events occurred simultaneously?
A) Taxes are cut, giving the government less revenue while household debt levels rise.
B) Interest rates fall, giving savers less interest income while government spending on research is cut.
C) There is a strong expansion in the economy of the country's main trading partner at the same time that the country's currency appreciates.
D) Debt levels in the country rise at the same time that the country's currency appreciates.

Question

Quizplus · Accepted Answer

When debt levels rise, consumers and businesses may reduce spending to manage their debt, decreasing aggregate demand. Simultaneously, if the country's currency appreciates, exports become more expensive for foreign buyers, reducing demand for the country's goods and services abroad, further decreasing aggregate demand.

Which of the Following Sets of Events Clearly Would Lead