The only government policy that has a DIRECT effect on the aggregate demand curve is:
A) changing the quantity of money.
B) raising or lowering the tax rate.
C) changing the level of government purchases of final goods and services.
D) changing the level of government transfers.

Question

Quizplus · Accepted Answer

Changing the level of government purchases of final goods and services directly affects the aggregate demand curve by increasing or decreasing aggregate expenditures in the economy. Changing the quantity of money, tax rates, and government transfers can indirectly affect aggregate demand through their impact on consumer and business spending, but they do not have a direct effect on the curve itself.

The Only Government Policy That Has a DIRECT Effect on the Aggregate