How is the aggregate demand curve affected when spending by the federal government exceeds net taxes?
A) The aggregate demand curve shifts leftward.
B) The aggregate demand curve remains the same.
C) The aggregate demand curve shifts rightward.
D) A downward movement occurs along the aggregate demand curve.

Question

How is the aggregate demand curve affected when spending by the federal government exceeds net taxes?  
A) The aggregate demand curve shifts leftward. 
B) The aggregate demand curve remains the same. 
C) The aggregate demand curve shifts rightward. 
D) A downward movement occurs along the aggregate demand curve.

Quizplus · Accepted Answer

When spending by the federal government exceeds net taxes, it creates a budget deficit, which increases government spending and ultimately leads to an increase in aggregate demand. As a result, the aggregate demand curve shifts rightward.

How Is the Aggregate Demand Curve Affected When Spending by the Federal