Figure 9.1 Alt text for Figure 9.1: In figure 9.1, a graph comparing real GDP and price level.
Long description for Figure 9.1: The x-axis is labelled, real GDP, and the y-axis is labelled, price level, with 0 at the vertex.Line AD1 begins in the top left corner and slopes down to the bottom center.Line AD2 follows the same slope as line AD1 but is plotted to the right.Points A and B are plotted along line AD1.Point A is a little less than half way along the left side of the line, and point B is little more than half way on the right side of the line.
-Refer to Figure 9.1.Ceteris paribus, a decrease in government spending would be represented by a movement from

Question

Figure 9.1  Alt text for Figure 9.1: In figure 9.1, a graph comparing real GDP and price level.
Long description for Figure 9.1: The x-axis is labelled, real GDP, and the y-axis is labelled, price level, with 0 at the vertex.Line AD1 begins in the top left corner and slopes down to the bottom center.Line AD2 follows the same slope as line AD1 but is plotted to the right.Points A and B are plotted along line AD1.Point A is a little less than half way along the left side of the line, and point B is little more than half way on the right side of the line.
-Refer to Figure 9.1.Ceteris paribus, a decrease in government spending would be represented by a movement from

Quizplus · Accepted Answer

A decrease in government spending would shift the aggregate demand curve (AD) to the left, from AD₂ to AD₁, indicating a decrease in both real GDP and price level. Thus, the correct option is B. Option A is incorrect because it shows a shift to the right in AD, indicating an increase in real GDP and price level. Options C and D represent a movement along AD, not a shift, which is not the case in this scenario.

Figure 91 Alt Text for Figure 9