During the late 1960s, U.S. defense spending increased as the United States fought in Vietnam. This
Increase in government expenditure on goods and services most likely created
A)an increase in potential GDP.
B)a decrease in aggregate supply.
C)a recessionary gap.
D)a decrease in aggregate demand because consumers' expenditures decreased.
E)an inflationary gap.

Question

Quizplus · Accepted Answer

The increase in government spending during the Vietnam War likely led to an inflationary gap, where aggregate demand exceeded aggregate supply, causing upward pressure on prices.

During the Late 1960s, U