Business, 07.04.2020 22:11 mikia950

Which of the following would cause a decrease in aggregate demand? A. a depreciation in the U. S. dollar relative to foreign currencies B. a decrease in interest rates through monetary policy C. a decrease in government spending D. a decrease in taxes E. All of the above.

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Answer from: alvaradovanessa14

The option that causes a decrease in aggregate demand is C. a decrease in government spending.

Aggregate demand, which refers to the total amount of goods and services that an economy's consumers are willing to demand, is the sum of consumer spending, business spending, government spending, and exports minus imports.

Economic factors that impact aggregate demand are:

Interest rates Household wealth Expectations of future inflation Value of the domestic currency

Government incurs expenditure through public consumption of goods and services, investments, and transfer payments. These expenditures influence aggregate demand, which is necessary for sustained economic development and growth.

Aggregate demand does not decrease when there is:

US dollar depreciation interest rates decrease Taxes decrease

Thus, aggregate demand decreases when the government reduces its spending.

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