In the short run, an increase in government purchases will cause
A) a shift of the DD curve to the left and an increase in output.
B) a shift of the DD curve to the right and a decrease in output.
C) a shift of the DD curve to the left and a decrease in output.
D) a shift of the DD curve to the right and an increase in output.
E) a shift of the DD curve the left and an appreciation of the currency.

Question

Quizplus · Accepted Answer

An increase in government purchases shifts the aggregate demand (DD) curve rightward, leading to an increase in output in the short run. This is because the increase in government purchases will increase demand for goods and services in the economy, creating a multiplier effect and stimulating production and output.

In the Short Run, an Increase in Government Purchases Will