An increase in government expenditure on goods and services ________ aggregate demand,shifting the aggregate demand curve ________ and potentially bringing the ________ phase of the business cycle.
A)increases;rightward;recession
B)increases;rightward;expansion
C)decreases;leftward;recession
D)increases;leftward;recession
E)decreases;rightward;expansion

Question

Quizplus · Accepted Answer

An increase in government expenditure on goods and services increases aggregate demand, shifting the aggregate demand curve rightward and potentially bringing the expansion phase of the business cycle. Therefore, option B is the correct answer. Option A is incorrect as it suggests that an increase in government expenditure on goods and services would bring the recession phase of the business cycle. Option C and D are incorrect as they suggest a decrease in government expenditure on goods and services, which would have the opposite effect of increasing aggregate demand. Finally, option E is incorrect as it suggests that a decrease in government expenditure on goods and services would bring the expansion phase of the business cycle, which is not the case.

An Increase in Government Expenditure on Goods and Services ________