An increase in government expenditure on goods and services leads to
A) the aggregate supply curve shifting rightward.
B) the aggregate demand curve shifting leftward.
C) the aggregate demand curve shifting rightward.
D) potential GDP increasing.
E) the aggregate supply curve shifting leftward.

Question

Quizplus · Accepted Answer

An increase in government expenditure on goods and services directly increases aggregate demand, as the government is increasing its spending in the economy, thus shifting the aggregate demand curve rightward.

An Increase in Government Expenditure on Goods and Services Leads