Figure 9.1 -Refer to Figure 9.1. An increase in government spending causes: A) the economy to move from Point A to Point B, but will not shift the aggregate demand curve. B) the aggregate demand curve to shift from AD₁to AD₂. C) the aggregate demand curve to shift from AD₁to AD₀. D) neither a shift of the aggregate demand curve nor a change in real GDP.

Question

Quizplus · Accepted Answer

An increase in government spending will shift the aggregate demand curve to the right, from AD₁ to AD₂. This is because an increase in government spending leads to more demand and an increase in aggregate demand.

Figure 9.1 -Refer to Figure 9.1. an Increase in Government Spending Causes