The massive increase in government spending during World War II moved the economy in the span of a few short years from mass unemployment and price stability to "overfull" employment and severe demand-pull inflation. This situation can be best characterized by:
A) a decrease in aggregate supply.
B) an increase in aggregate supply.
C) an increase in aggregate demand.
D) a decrease in aggregate demand.

Question

Quizplus · Accepted Answer

The massive increase in government spending during World War II led to an increase in aggregate demand, resulting in overfull employment and demand-pull inflation.

The Massive Increase in Government Spending During World War II