If the government were to decrease spending, aggregate demand would _______ and GDP would _______.
A) fall; fall as well.
B) rise; fall.
C) fall; rise.
D) rise; rise as well.

Question

Quizplus · Accepted Answer

When the government decreases spending, it leads to a decrease in aggregate demand, as government spending is a component of aggregate demand. As a result, GDP would also fall because aggregate demand and GDP are positively related.

If the Government Were to Decrease Spending, Aggregate Demand Would