Other things equal, an increase in government spending

Question

Quizplus · Accepted Answer

An increase in government spending directly leads to an increase in aggregate expenditures, as it represents an injection of new spending into the economy. This increase in aggregate expenditures shifts the aggregate demand curve to the right, but it does not affect the slope of the curve. Additionally, it does not impact the slope or position of the aggregate supply curve or reduce the equilibrium level of GDP.

Other Things Equal, an Increase in Government Spending