Suppose a country repeals an investment tax credit and that leads to a decrease in investment spending of $100 billion. Suppose the multiplier is 1.2 and the economy's real GDP is $5,000 billion. This contractionary action
A) will shift the aggregate demand curve to the left by $120 billion.
B) will shift the aggregate demand curve to the left by $6,000 billion.
C) will shift the aggregate supply curve to the left by $120 billion.
D) will shift the aggregate supply curve to the left by $6,000 billion.
Ans: A) will shift the aggregate demand curve to the left by $120 billion.
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