Suppose Congress decides to reduce government expenditures by reducing its purchases of weapons systems. Which of the following would you expect to occur as a result of this change?

Question

Quizplus · Accepted Answer

Reducing government expenditures, such as on weapons systems, would likely lead to a decrease in aggregate demand. This decrease in demand can lead to lower inflation and higher unemployment in the short run, which is represented by a movement down and to the right along the short-run Phillips Curve.

Suppose Congress Decides to Reduce Government Expenditures by Reducing Its