Which of the following will increase aggregate expenditure in Canada?
A)an increase in the value of the dollar
B)an increase in the price level
C)an increase in interest rates
D)an increase in government purchases
E)a rise in interest rates

Question

Quizplus · Accepted Answer

An increase in government purchases will directly increase aggregate expenditure in Canada, as government purchases are a component of aggregate expenditure. An increase in the value of the Canadian dollar (choice A) can lead to a decrease in net exports, which can reduce aggregate expenditure. An increase in the price level (choice B) may decrease aggregate expenditure because it reduces the real value of money, causing consumers and firms to reduce their spending. Similarly, an increase in interest rates (choices C and E) may reduce aggregate expenditure as it increases borrowing costs for firms and consumers, leading to a decrease in investment and consumption.

Which of the Following Will Increase Aggregate Expenditure in Canada