Based on the above figure, how does a decrease in government spending affect the aggregate expenditure line? a. It shifts the aggregate expenditure line downward. b. It shifts the aggregate expenditure line upward. c. It decreases the slope of the aggregate expenditure line. d. It increases the slope of the aggregate expenditure line.

Assume the marginal propensity to consume is 0.8. How will a decrease in taxes of $100 billion and a decrease in government spending of $100 billion affect aggregate demand?ResponsesAggregate demand will decrease by $900 billion.Aggregate demand will decrease by $900 billion.Aggregate demand will decrease by $500 billion.Aggregate demand will decrease by $500 billion.Aggregate demand will decrease by $400 billion.Aggregate demand will decrease by $400 billion.Aggregate demand will decrease by $100 billion.Aggregate demand will decrease by $100 billion.Aggregate demand will not change.

Reduced Government Spending: Government spending is a component of aggregate demand. In the Keynesian framework, a reduction in government spending will shift the aggregate demand curve to the left. This would typically lead to a decrease in the overall output (or GDP) as government spending is a direct component of GDP calculation. Effect on Output: A decrease in government spending reduces aggregate demand, which, in a Keynesian cross model, is represented by a downward shift in the aggregate expenditure line. This results in a lower equilibrium output. Effect on Exports and Imports: In the short run, a decrease in output can lead to a decrease in imports because domestic consumers and businesses are spending less overall, including on foreign goods. Exports may remain unchanged in the immediate short run since they are more influenced by foreign demand than domestic policy changes. However, if the currency depreciates due to the reduction in demand, this could eventually make exports more competitive abroad and could potentially increase exports. Effect on Net Exports (NX): Net exports (NX) are calculated as exports minus imports. If imports decrease while exports either increase or remain constant, NX would rise, all else being equal. The NX line on a graph that plots net exports against domestic income would shift upwards due to a reduction in imports or an increase in exports.

Which of the following would NOT cause a shift in the aggregate demand curve?Question 9Answera.changes in spending by consumersb.changes in spending by foreign buyers c.changes in spending by businessesd.changes in the prices of goods and servicese.changes in spending by the government

Which of the following is a reason why increases in the price level result in a decline in aggregate expenditure? a. Price level increases cause firms and consumers to hold more money, which raises the interest rate, ceteris paribus. Higher interest rates lower consumption and planned investment expenditures, which lowers aggregate expenditure. b. As the price level rises, government spending falls, which lowers aggregate expenditure. c. Price level increases raise real wealth, which causes consumption spending and aggregate expenditure to decline. d. Price level increases in Australia relative to other countries raise net exports, which lowers aggregate expenditure.

Which of the following will result in a shift in the aggregate supply curve?Question 30Select one:a.changes in spending by businesses. b.changes in spending by foreign buyers.c.changes in spending by the government.d.changes in spending by consumers.e.changes in input prices.