A temporary increase in government spending that leads to only a small decline in lifetime wealth likely shifts the output demand curve to the
A) right by more than the rightward shift in output supply.
B) right by less than the rightward shift in output supply.
C) left by more than the leftward shift in output supply.
D) left by less than the leftward shift in output supply.
E) right by the same amount as the rightward shift in output supply.

Question

Quizplus · Accepted Answer

A temporary increase in government spending increases aggregate demand, shifting the output demand curve to the right. If the decline in lifetime wealth is small, the shift in demand is likely more significant than any shift in supply.

A Temporary Increase in Government Spending That Leads to Only