How does an increase in government spending affect the aggregate expenditure line?
A)It shifts the aggregate expenditure line upward.
B)It shifts the aggregate expenditure line downward.
C)It increases the slope of the aggregate expenditure line.
D)It decreases the slope of the aggregate expenditure line.

Question

Quizplus · Accepted Answer

An increase in government spending will shift the aggregate expenditure line upward as it will increase the level of spending and aggregate demand in the economy. This is because government spending is a component of aggregate expenditure and directly contributes to the total spending in the economy.

How Does an Increase in Government Spending Affect the Aggregate