The aggregate demand curve will shift to the left ________ the initial decrease in government purchases.
A)by less than
B)by more than
C)by the same amount as
D)sometimes by more than and other times by less than

Question

Quizplus · Accepted Answer

The initial decrease in government purchases will reduce aggregate demand, causing a shift to the left. The amount of the shift will depend on the size of the decrease in government purchases and the extent to which other economic factors, such as consumption and investment, are affected. However, in general, the shift will be more than the initial decrease in government purchases due to the multiplier effect. The decrease in government purchases will cause a decrease in income, which will lead to a decrease in consumption and investment spending, further reducing aggregate demand.

The Aggregate Demand Curve Will Shift to the Left ________