Spending on the war in Afghanistan is essentially categorized as government purchases. How do dcreases in spending on the war in Afghanistan affect the aggregate demand curve?

Question

Scarlett Richard

Business

21 March, 05:20

Spending on the war in Afghanistan is essentially categorized as government purchases. How do dcreases in spending on the war in Afghanistan affect the aggregate demand curve?

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Answers (1)

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Anya Sherman · Answer 1

The decrease in spending will cause the aggregate demand curve to shift to the left.

Explanation:

The aggregate demand in an economy comprises of consumption spending, private investment, government purchases, and net exports. If the spending on the Afghanistan war is considered a government purchase, a decrease in this spending will cause the aggregate demand to decline.

This decline in aggregate demand will cause the aggregate demand curve to move to the left. This will cause the price level to decline.