In order to ________, a government must decrease spending and increase taxation.
A) increase aggregate demand
B) decrease aggregate demand
C) increase aggregate supply
D) decrease aggregate supply

Question

Quizplus · Accepted Answer

In order to decrease aggregate demand, a government must decrease spending and increase taxation. This is because government spending and taxation are two of the main components of aggregate demand. When the government reduces spending and increases taxes, it reduces the amount of money in circulation in the economy, which decreases demand for goods and services. This can be a common approach to controlling inflation or reducing a budget deficit.

In Order to ________, a Government Must Decrease Spending and Increase