Exhibit 15-3 Aggregate demand and supply model

-Beginning at equilibrium E₁ in Exhibit 15-3,when the government increases spending or cuts taxes the economy will experience:

Question

Exhibit 15-3 Aggregate demand and supply model
 
-Beginning at equilibrium E₁ in Exhibit 15-3,when the government increases spending or cuts taxes the economy will experience:

Quizplus · Accepted Answer

When the government increases spending or cuts taxes, the aggregate demand curve shifts to the right. This causes an increase in both real output and the price level, leading to demand-pull inflation.

Exhibit 15-3 Aggregate Demand and Supply Model