Suppose a Country Decreases Government Purchases by $400 Billion

question 63

Multiple Choice

Suppose a country decreases government purchases by $400 billion. Suppose the government spending multiplier is 1.5 and the economy's real GDP is $8,000 billion. This contractionary policy action shifts the aggregate demand curve to the left by

• A) $12,000 billion.
• B) $600 billion.
• C) $533.3 billion.
• D) $266.6 billion.

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