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Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
ISBN: 9781337091985

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BuyFindarrow_forward

Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
ISBN: 9781337091985
Textbook Problem

Suppose that the government reduces spending on highway construction by $10 billion. Which way does the aggregate-demand curve shift? Explain why the shift might be larger or smaller than $10 billion.

To determine

Multiplier and crowding out effect on aggregate demand.

Explanation

If the government reduces the spending on highway construction by $10 billion, the aggregate demand will decrease causing AD curve to shift to the left...

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