If the government decreases spending to move the economy closer to full employment,the government is most likely trying to

Question

Quizplus · Accepted Answer

Decreasing government spending would decrease aggregate demand, leading to a contractionary gap. If the government wants to move the economy closer to full employment, it would need to increase aggregate demand by increasing spending, not decreasing it. Therefore the government is most likely trying to close the contractionary gap by increasing aggregate demand.

If the Government Decreases Spending to Move the Economy Closer