Question

Which one of the following statements is true regarding shifts in the aggregate demand curve? The aggregate demand curve shifts inward, due to an increase in net exports. The aggregate demand curve shifts outward, due to an increase in imports. The aggregate demand curve shifts outward, due to a decrease in investment. The aggregate demand curve shifts inward, due to decrease in government spending. The aggregate demand curve shifts inward, due to an increase

Answer 1

The correct statement regarding shifts in the aggregate demand curve is that the aggregate demand curve shifts inward due to a decrease in government spending.

Step-by-step explanation:

The correct statement regarding shifts in the aggregate demand curve is that the aggregate demand curve shifts inward due to a decrease in government spending.

Shifting of the aggregate demand (AD) curve is caused by changes in the components of aggregate demand, such as consumption spending, investment spending, government spending, and spending on exports minus imports. When there is a decrease in government spending, it results in a decrease in total spending at every price level, causing the AD curve to shift inward to the left.

For example, if the government reduces its spending on infrastructure projects, it will lead to a decrease in total spending in the economy, which will cause a shift of the AD curve inward.