An increase in government expenditure shifts the AD curve ________ and an increase in taxes shifts the AD curve ________.
A) rightward; rightward
B) rightward; leftward
C) leftward; rightward
D) leftward; leftward

Question

Quizplus · Accepted Answer

An increase in government expenditure increases aggregate demand, shifting the AD curve rightward. An increase in taxes reduces consumers' disposable income, decreasing consumption and shifting the AD curve leftward.

An Increase in Government Expenditure Shifts the AD Curve ________