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14 February, 16:35

A decrease in government spending initially and primarily shifts

a. neither aggregate demand nor aggregate supply.

b. aggregate demand to the right.

c. aggregate demand to the left.

d. aggregate supply to the right.

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Answers (1)
  1. 14 February, 17:03
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    c. aggregate demand to the left.

    Explanation:

    When the government spending is decreased, it means that the people are paying more. Basically government spends in the form of relaxation, subsidies and monetary benefits to people.

    In that case people are left with more money in their hands, as basic needs are assured by the government.

    But if the government do not spend the money, then people will not have much money in their hands.

    And accordingly the spending capacity will decrease and so does the demand will decrease.

    Accordingly the demand shall shift to lower than the current status, and moving to left.
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