The following question are based on the following diagram:

-From the diagram,one can infer that
A) changes in government spending change the value of the multiplier.
B) an increase in government spending results in a budget surplus.
C) a decrease in government spending results in a corresponding increase in private spending.
D) government spending should always be increased.
E) an increase (or decrease) in government spending leads to an increase (or decrease) in total intended spending.

Question

The following question are based on the following diagram:
 
-From the diagram,one can infer that
A) changes in government spending change the value of the multiplier. 
B) an increase in government spending results in a budget surplus. 
C) a decrease in government spending results in a corresponding increase in private spending. 
D) government spending should always be increased. 
E) an increase (or decrease) in government spending leads to an increase (or decrease) in total intended spending.

Quizplus · Accepted Answer

The diagram shows that an increase (or decrease) in government spending leads to an increase (or decrease) in total intended spending. This is depicted by the shift in the aggregate spending curve. However, the other choices are not supported by the diagram. A) The diagram does not show any direct relationship between changes in government spending and the value of the multiplier. B) The diagram does not necessarily imply that an increase in government spending results in a budget surplus. C) The diagram does not explicitly show a corresponding increase in private spending with a decrease in government spending. D) The diagram does not provide evidence to support the claim that government spending should always be increased.

The Following Question Are Based on the Following Diagram