Suppose that there is a multiplier effect that is greater than one and that there are no crowding out or investment accelerator effects.Which of the following would shift aggregate demand right by more than the increase in expenditures?
A)an increase in government expenditures.
B)an increase in net exports.
C)an increase in investment spending.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

As there is a multiplier effect that is greater than one, any increase in expenditures (such as an increase in government expenditures, net exports or investment spending) will lead to a greater increase in aggregate demand. Therefore, all of the options (A, B, and C) would shift aggregate demand right by more than the increase in expenditures.

Suppose That There Is a Multiplier Effect That Is Greater