Question

Suppose government spending is cut. Other things being equal, the aggregate demand for national production will

rise.


remain constant.


fall.


All of the above

Answer 1

Fall.

Step-by-step explanation:

Since government spending is one of the components of aggregate demand, an increase in government spending will shift the demand curve to the right. A reduction in taxes will leave more disposable income and cause consumption and savings to increase, also shifting the aggregate demand curve to the right.