What impact do you think a major reduction in US government spending would have
ID: 1166486 • Letter: W
Question
What impact do you think a major reduction in US government spending would have on the Canadian? economy? Explain.
A major reduction in US government spending would cause? (Choose one)
The US aggrgate supply curve to shift to the left
The US aggregate supply curve to shift to the right
No change in US aggregate supply or aggregate demand
The US aggregate demand curve to shift to the left
The US aggregate demand curve to shift to the right
which would ?not change, decrease, increase (Choose one)
US imports from Canada and ?increase, not change, decrease(Choose one)
US exports to Canada. This would cause real GDP in the Canadian economy to
?rise, not change, fall (Choose one)
Explanation / Answer
1) Government spending is the component of aggregate demand. AD = C + I + G + NX
Decrease in G causes decrease in AD. So, AD shifts leftwards.
The US aggregate demand curve to shift to the left.
2) not change imports
3) not change exports
4) fall in real GDP
Fall in G causes no change in Exports and Imports. Leftward shift of AD causes decrease in real GDP.
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