ECONOMICS
INFLATION
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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reduce the level of AD and to make people spend less
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decrease the AD curve and the level of C, I and inflation
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to make borrowing more expensive so people stop spending
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to reduce imports so domestic producers have less competition
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Detailed explanation-1: -Contractionary fiscal policy does the reverse: it decreases the level of aggregate demand by decreasing consumption, decreasing investment, and decreasing government spending, either through cuts in government spending or increases in taxes.
Detailed explanation-2: -Along the AD curve, real GDP increases and the price level decreases. In other words, AD slopes down. Changes in the price level will cause a movement along the AD curve.
Detailed explanation-3: -Demand-pull inflation is inflation caused by an increase in AD. As you can see on the graph below, if there is an increase in AD the price level increases. Inflation is the rate of increase in the price level. A decrease in AD will cause the level of output to decline indicating higher unemployment.
Detailed explanation-4: -Government macroeconomic policy choices can shift AD. Higher government spending causes AD to shift to the right-see Diagram A, on the left above-while lower government spending will cause AD to shift to the left-see Diagram B, on the right above. Tax policy can affect consumption and investment spending as well.