A Decrease in Government Transfer Payments

question 219

Multiple Choice

A decrease in government transfer payments

• A) increases aggregate demand.
• B) decreases the aggregate quantity demanded.
• C) increases the aggregate quantity demanded.
• D) decreases aggregate demand.

---

Definitions:

Investment

The allocation of resources, usually money, with the expectation of generating an income or profit.

Saving

The portion of income not spent on consumption or taxes, typically put aside for future use or investment.

Potential GDP

Potential GDP refers to the maximum output an economy can produce without triggering inflation, if all resources are fully employed.

Full-employment GDP

Full-employment GDP is the maximum potential output an economy can produce when all resources, including labor, are fully utilized without causing inflation.