If the government decides to increase expenditure on public transportation, there will be:
A) a movement along the aggregate-demand curve
B) no effect on the aggregate-demand curve
C) a shift of the aggregate-supply curve
D) a shift of the aggregate-demand curve to the left
E) a shift of the aggregate-demand curve to the right

Question

Quizplus · Accepted Answer

Increasing government expenditure on public transportation would lead to an increase in employment and the income of those involved in the industry. This would eventually lead to an increase in consumer spending, thereby shifting the aggregate-demand curve to the right.

If the Government Decides to Increase Expenditure on Public Transportation