Figure 16-1
-Refer to the Figure 16-1.If the economy starts at c and 1,then in the short run,where does a decrease in government expenditures move the economy?
A) d and 2
B) d and 3
C) e and 3
D) e and 2

Question

Figure 16-1 
-Refer to the Figure 16-1.If the economy starts at c and 1,then in the short run,where does a decrease in government expenditures move the economy?
A) d and 2 
B) d and 3 
C) e and 3 
D) e and 2

Quizplus · Accepted Answer

A decrease in government expenditures would lead to a decrease in aggregate demand, shifting the economy from point 1 to point 3 on the aggregate demand curve, and from point c to point d on the short-run aggregate supply curve.

Figure 16-1 -Refer to the Figure 16-1.If the Economy Starts at C