Which of these could cause deficient demand?

A rise in government spendingCorrect answerYour answerA sharp fall in private investment as firms become pessimisticCorrect answerYour answerA cut in the repo rateCorrect answerYour answerA rise in exportsCorrect answerYour answer

Show the answer and explanation

CorrectNot quiteAnswer B

Correct answer: B

Lower investment cuts AD directly and, through the multiplier, income.
The other three raise AD.

Concept: Causes of deficient demand
Typical timeTypical: 70 s
Your timeYours: —

The rule this testsDeficient demand and the deflationary gap

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Which of these could cause deficient demand?

Explanation