Figure 34-5 -Refer to Figure 34-5. An increase in government purchases will A)shift aggregate demand from AD₁ to AD₃. B)shift aggregate demand from AD₁ to AD₂. C)cause movement from point C to point D along AD₁. D)have no effect on aggregate demand.

Question

Quizplus · Accepted Answer

An increase in government purchases is a fiscal policy action that directly increases aggregate demand, shifting the aggregate demand curve to the right, from its initial position to a new position reflecting higher demand.

Figure 34-5 ​

Figure 34-5