A change in government spending can close an expansionary gap by shifting the short-run aggregate supply curve.

Name: A change in government spending can close an expansionary gap by shifting the short-run aggregate supply curve.
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Question

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A change in government spending affects the aggregate demand curve, not the short-run aggregate supply curve. It can close an expansionary gap by increasing or decreasing aggregate demand, depending on whether the government is reducing or increasing its spending.

A Change in Government Spending Can Close an Expansionary Gap