Suppose the economy is in a recession and the government decides it needs to reduce the budget deficit.Other things equal,this would tend to

Question

Quizplus · Accepted Answer

If the government decides to reduce the budget deficit during a recession, it will likely do so by reducing its government spending or increasing taxes. These actions would decrease aggregate demand and shift the IS curve further to the left, exacerbating the recession. Therefore, choice B is correct. The other choices are incorrect because reducing the budget deficit is not likely to have a direct impact on the MP curve.

Suppose the Economy Is in a Recession and the Government