Spending on the war in Afghanistan is essentially categorized as government purchases.How do increases in spending on the war in Afghanistan affect the aggregate demand curve?
A)They will move the economy down along a stationary aggregate demand curve.
B)They will move the economy up along a stationary aggregate demand curve.
C)They will shift the aggregate demand curve to the right.
D)They will shift the aggregate demand curve to the left.

Question

Quizplus · Accepted Answer

Increases in spending on the war in Afghanistan lead to an increase in government purchases. Since government purchases are a component of aggregate demand, this will shift the aggregate demand curve to the right. This is because an increase in government spending will lead to an increase in overall spending and thus an increase in demand for goods and services.

Spending on the War in Afghanistan Is Essentially Categorized as Government