When drawn against the real interest rate, the output supply curve unambiguously shifts to the right if either or both of the following occur.
A) an increase in current government spending and an increase in future government spending
B) an increase in current government spending and a decrease in future government spending
C) a decrease in current government spending and an increase in future government spending
D) a decrease in current government spending and a decrease in future government spending
E) a decrease in current government spending and an increase in the real interest rate

Question

Quizplus · Accepted Answer

An increase in government spending, both current and future, would increase output and shift the output supply curve to the right when drawn against the real interest rate.

When Drawn Against the Real Interest Rate, the Output Supply