If the U.S. government increases its expenditures (without any changes in taxes)while the Federal Reserve Bank decreases the money supply:
A)the AD curve would likely shift to the left.
B)the AD curve would likely shift to the right.
C)the AD curve would likely remain unchanged.
D)what happens to the AD curve is unclear.

Question

Quizplus · Accepted Answer

The increase in government expenditures would shift the AD curve to the right, while the decrease in the money supply would shift it to the left. The net effect on the AD curve is unclear without knowing the relative magnitudes of these changes.

If the US Government Increases Its Expenditures (Without Any Changes in Taxes)while