Exhibit 12-3
-In an economy characterized by the aggregate demand curve AD and the short-run aggregate supply curve SRAS₅₀in Exhibit 12-3, the government could decrease government spending to shift the aggregate demand curve to AD' in order to eliminate the recessionary gap.

Question

Exhibit 12-3 Exhibit 12-3 -In an economy characterized by the aggregate demand curve AD and the short-run aggregate supply curve SRAS<sub>50 </sub>in Exhibit 12-3, the government could decrease government spending to shift the aggregate demand curve to AD' in order to eliminate the recessionary gap.

Exhibit 12-3 -In an economy characterized by the aggregate demand curve AD and the short-run aggregate supply curve SRAS<sub>50 </sub>in Exhibit 12-3, the government could decrease government spending to shift the aggregate demand curve to AD' in order to eliminate the recessionary gap.

-In an economy characterized by the aggregate demand curve AD and the short-run aggregate supply curve SRAS₅₀in Exhibit 12-3, the government could decrease government spending to shift the aggregate demand curve to AD' in order to eliminate the recessionary gap.

Quizplus · Accepted Answer

Decreasing government spending would shift the aggregate demand curve to the left, potentially increasing a recessionary gap rather than eliminating it.

Exhibit 12-3 -In an Economy Characterized by the Aggregate Demand Curve AD