Economics (AS & A Level) · Oct / Nov 2023 · Paper 12 · Question 29

A government wants to reduce inflation. It has decided to cut government spending by $1bn. The diagram shows different starting positions for the country's aggregate demand (AD) curve. Which starting position for the aggregate demand curve would make this policy least effective?

1. AAD1
2. BAD2
3. CAD3
4. DAD4

As printed in the paper