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decline in investment spending leads to
Solution: A decline in investment spending leads to a lowering of the aggregate demand and has a multiplier effect on the real GDP in the smae manner as an increase in investment spending does. In this case however, the real GDP falls. The fall in investment spending leads to an initial fall in the real GDP, which leads to a fall…

in the disposable income which in turn leads to lower consumer spending, which in turn leads to another fall inreal GDP and so on.So, as an indirect result of decline ininvestment spending the consumer spending also falls.



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