A decrease in government spending will cause a(n):
A) Increase in the quantity of real output demanded
B) Decrease in the quantity of real output demanded
C) Decrease in aggregate demand
D) Increase in aggregate demand

Question

Quizplus · Accepted Answer

A decrease in government spending means there is less government demand for goods and services, leading to a decrease in aggregate demand since government spending is a component of aggregate demand. This can lead to a decrease in the quantity of output demanded in the short-term, as businesses may reduce their production levels in response to the lower overall demand in the economy.

A Decrease in Government Spending Will Cause A(n)