An exogenous rise in government expenditures will have the same effect on GDP as an equal rise in either autonomous ________ or autonomous ________.

Question

Quizplus · Accepted Answer

An exogenous rise in government expenditures will increase aggregate demand and shift the AD curve to the right. An equal rise in autonomous consumption or autonomous investment will also increase aggregate demand and shift the AD curve to the right by the same amount. Therefore, the effect on GDP will be the same. The other options do not have a direct effect on aggregate demand and therefore do not have the same effect on GDP.

An Exogenous Rise in Government Expenditures Will Have the Same