Final answer:
A decrease in government purchases causes the aggregate demand curve to shift to the left, representing a decrease in aggregate demand, which can lead to lower income levels and a contraction in economic growth.
Step-by-step explanation:
When government purchases decrease, this leads to a shift in the aggregate demand curve to the left, representing a decrease in aggregate demand. The decrease in government spending reduces the overall amount of government-induced demand for goods and services in the economy. This decline means there is less economic activity being stimulated by the government, which could result in a decrease in income levels and a contraction in economic growth.
Such a decrease in government spending could lead households to become hesitant about consuming and firms might decide against investing, both actions that would contribute to the leftward shift of the aggregate demand curve.