Unanticipated increase in the government expenditures would
A)shift the LM curve to the right,and the AD curve up and to the right.
B)shift the IS curve to the right,and the AD curve up and to the right.
C)shift the IS curve to the left,and the AD curve up and to the right.
D)shift the IS curve to the right,and the AD curve down and to the left.

Question

Quizplus · Accepted Answer

An unanticipated increase in government expenditures would increase the level of autonomous spending in the economy, shifting the IS curve to the right. This would result in an increase in output and income, leading to an increase in aggregate demand (AD) and shifting the AD curve up and to the right.

Unanticipated Increase in the Government Expenditures Would