An increase in government purchases of $100 billion will shift the aggregate-demand curve to the:
A)left by more than $100 billion
B)left by more or less than $100 billion
C)right by more than $100 billion
D)right by more or less than $100 billion

Question

Quizplus · Accepted Answer

An increase in government purchases will directly add to aggregate demand by the same amount, so the AD curve will shift to the right by $100 billion or more. This is because the multiplier effect may amplify the impact of the initial increase in government spending. Therefore, choices A and B are incorrect because the AD curve will not shift to the left. Choice C is incorrect because the AD curve will shift only by the same amount as the increase in government purchases.

An Increase in Government Purchases of $100 Billion Will Shift