Suppose the government of Japan increases its expenditure on goods and services. In the short run, this increase will

Question

Quizplus · Accepted Answer

An increase in government expenditure will increase aggregate demand (AD) in Japan, causing the AD curve to shift rightward. This is because the government expenditure contributes to the country's output, income, and employment level, leading to an increase in overall spending in the economy. The increase in spending may also lead to an increase in the price level in the short run due to the increased demand for goods and services.

Suppose the Government of Japan Increases Its Expenditure on Goods