The government could increase aggregate demand by $1 trillion by
A) increasing its expenditures on goods and services by less than $1 trillion.
B) increasing its taxes by less than $1 trillion.
C) increasing its expenditures on goods and services by exactly $1 trillion.
D) increasing its expenditures on goods and services by more than $1 trillion.

Question

Quizplus · Accepted Answer

Increasing government expenditures on goods and services by less than $1 trillion can increase aggregate demand by $1 trillion due to the multiplier effect, where initial spending leads to further rounds of spending.

The Government Could Increase Aggregate Demand by $1 Trillion by