Final answer:
A decrease in government expenditure will have a negative impact on both aggregate demand and real GDP of the economy. To address a recession, measures such as expansionary fiscal policies and lower interest rates can be taken.
Step-by-step explanation:
A decrease in government expenditure will have a negative impact on both aggregate demand and real GDP of the economy. When the government spends less, it reduces the total amount of money flowing into the economy, which in turn reduces consumer spending and business investment. This decrease in aggregate demand leads to lower production levels, resulting in a decline in the real GDP.
To address a recession in the economy of Donny Republic, several measures can be taken. One option is for the government to implement expansionary fiscal policies, such as increasing government spending on infrastructure projects or providing tax cuts to stimulate consumer spending. Another measure is for the central bank to lower interest rates, which encourages borrowing and investment. Additionally, the government can provide financial assistance to struggling industries or individuals through unemployment benefits or grants.