If government purchases increase, inflation will increase, and there will be an upward movement along the AD curve.

Name: If government purchases increase, inflation will increase, and there will be an upward movement along the AD curve.
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Question

Quizplus · Accepted Answer

An increase in government purchases shifts the Aggregate Demand (AD) curve to the right, not an upward movement along the curve. An upward movement along the AD curve would imply an increase in the price level without a change in the components of aggregate demand.

If Government Purchases Increase, Inflation Will Increase, and There Will