In the short run, an increase in government expenditure will
I. shift the aggregate demand curve rightward.
II. increase real GDP.
III. increase the government expenditure multiplier.
IV. increase the autonomous tax multiplier.

Question

Quizplus · Accepted Answer

An increase in government expenditure directly increases aggregate demand, shifting the aggregate demand curve rightward (I). This increase in demand typically leads to a rise in real GDP in the short run (II). The government expenditure multiplier and autonomous tax multiplier are not directly affected by a change in government expenditure.

In the Short Run, an Increase in Government Expenditure Will