-In the above figure, if the economy is initially at point B and government expenditure decreases, the economy will
A) move to point C.
B) move to point A.
C) move to point D.
D) stay at point B.

Question

-In the above figure, if the economy is initially at point B and government expenditure decreases, the economy will
A) move to point C. 
B) move to point A. 
C) move to point D. 
D) stay at point B.

Quizplus · Accepted Answer

A decrease in government expenditure would reduce aggregate demand, shifting the economy from a higher level of output and employment (point B) towards a lower level of output and employment (point A), assuming other factors remain constant.

-In the Above Figure, If the Economy Is Initially at Point