Spending on the military is essentially categorized as government purchases.How do increases in spending on a military campaign affect the aggregate demand curve?
A)They will move the economy down along a stationary aggregate demand curve.
B)They will move the economy up along a stationary aggregate demand curve.
C)They will shift the aggregate demand curve to the right.
D)They will shift the aggregate demand curve to the left.
E)As military personnel are not considered part of the labour force, a military campaign will have no impact on the economy.

Question

Quizplus · Accepted Answer

Increases in spending on a military campaign will shift the aggregate demand curve to the right. This is because government purchases are a component of aggregate demand and an increase in government purchases will increase overall spending in the economy. As a result, this will cause an increase in both output and prices.

Spending on the Military Is Essentially Categorized as Government Purchases