Which of the following fiscal policies would shift the aggregate demand curve to the left?
A) Taxes are decreased.
B) Government purchases are decreased.
C) The Federal Reserve raises the discount rate.
D) The Federal Reserve purchases bonds on the open market.

Question

Quizplus · Accepted Answer

Decreasing government purchases directly reduces government spending, one of the components of aggregate demand (AD). When the government spends less, it directly decreases the total demand in the economy, shifting the aggregate demand curve to the left.

Which of the Following Fiscal Policies Would Shift the Aggregate