-The figure illustrates aggregate demand and aggregate supply in Sparta. Which of the following events will decrease Sparta's real GDP in the short run?
A) a decrease in taxes
B) a fall in resource prices
C) a decrease in government expenditure
D) an increase in investment

Question

-The figure illustrates aggregate demand and aggregate supply in Sparta. Which of the following events will decrease Sparta's real GDP in the short run?
A) a decrease in taxes 
B) a fall in resource prices 
C) a decrease in government expenditure 
D) an increase in investment

Quizplus · Accepted Answer

A decrease in government expenditure reduces aggregate demand, which can lead to a decrease in real GDP in the short run.

-The Figure Illustrates Aggregate Demand and Aggregate Supply in Sparta