An increase in government spending,other things constant,will cause a:
A)leftward shift of the aggregate supply curve.
B)rightward shift of the aggregate supply curve.
C)leftward shift of the aggregate demand curve.
D)rightward shift of the aggregate demand curve.
E)downward movement along the aggregate supply curve.

Question

Quizplus · Accepted Answer

An increase in government spending will lead to an increase in overall demand for goods and services, as the government is one of the largest purchasers in an economy. This will cause a rightward shift of the aggregate demand curve, as at any given price level, there will be more demand for goods and services.

An Increase in Government Spending,other Things Constant,will Cause A