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Flag question Suppose there is a permanent fall in private aggregat.pdf

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alukkasprince

A permanent fall in private aggregate demand for a country's output would decrease the country's output level. This occurs because with lower aggregate demand, there is less demand for the country's goods and services. To counteract the fall in output, the recommended government policy response would be for the government to increase its own spending and decrease taxes, which would help boost aggregate demand back up and stabilize the country's output level.

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Flag question: Suppose there is a permanent fall in private aggregate demand for a countrys output (a downward shift of the entire aggregate demand schedule). What is the effect on output? What government policy response would you recommend?

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  • 1. Flag question: Suppose there is a permanent fall in private aggregate demand for a countrys output (a downward shift of the entire aggregate demand schedule). What is the effect on output? What government policy response would you recommend?