In 2009, the U.S. government passed a bill that increased government spending. In response, the aggregate demand curve most likely:
A) shifted to the left.
B) shifted to the right.
C) remained unchanged, but the economy moved up along the curve to a higher quantity.
D) remained unchanged, but the economy moved down along the curve to a lower quantity.

Question

Quizplus · Accepted Answer

An increase in government spending would shift the aggregate demand curve to the right, as there would be a higher demand for goods and services due to the increase in government spending. This would lead to an increase in both real GDP and inflation.