Assuming no crowding-out, investment-accelerator, or multiplier effects, how will a $100 billion increase in government expenditures shift aggregate demand?
A) It will shift aggregate demand right by more than $100 billion.
B) It will shift aggregate demand right by $100 billion.
C) It will shift aggregate demand right by less than $100 billion.
D) It will shift aggregate demand left by more than $100 billion.

Question

Quizplus · Accepted Answer

A $100 billion increase in government expenditures will shift aggregate demand right by $100 billion, assuming no crowding-out, investment-accelerator, or multiplier effects. This is because government spending is a component of aggregate demand, and an increase in government spending directly increases aggregate demand by the same amount.

Assuming No Crowding-Out, Investment-Accelerator, or Multiplier Effects, How Will a $100