A reduction in government spending causes the equilibrium level of aggregate output to ________ at any given interest rate and shifts the ________ curve to the ________,everything else held constant.
A)rise;LM;right
B)fall;IS;left
C)fall;LM;left
D)rise;IS;right

Question

Quizplus · Accepted Answer

A reduction in government spending decreases aggregate demand, leading to a fall in the equilibrium level of aggregate output. This is represented by a leftward shift of the IS (Investment-Saving) curve, as it reflects a lower level of income and output at any given interest rate.

A Reduction in Government Spending Causes the Equilibrium Level of Aggregate