Question

Explain why cuts in public expenditure are likely to reduce aggregate demand?
Please explain this in detail.

Answer 1

Reducing public spending will lead to a reduction in aggregate demand, as the number of social benefits and benefits to the population will decrease, thus the population will be able to spend less money than would have been with stateless public expenditures. Therefore, the money in circulation on the national market will be less, which will lead to a decrease in consumption and a decrease in aggregate demand.