Suppose that the U.S. government doubles its spending on health care. The _____ curve shifts _____, output _____, and prices _____.
A) short-run aggregate supply; right; increases; decrease
B) short-run aggregate supply; left; decreases; increase
C) aggregate demand; left; decreases; decrease
D) aggregate demand; right; increases; increase

Question

Quizplus · Accepted Answer

Doubling the spending on health care would increase aggregate demand, causing the AD curve to shift right. Output would increase as a result, but the increased demand could also lead to higher prices. Since option D is the only one that has the AD curve shifting right, it is the correct choice.

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