An increase in government purchases of $200 billion will shift the aggregate demand curve to the right by
A)$200 billion.
B)less than $200 billion.
C)more than $200 billion.
D)None of the above are correct.This policy shifts the long-run aggregate supply curve.

Question

Quizplus · Accepted Answer

An increase in government purchases of $200 billion will shift the aggregate demand curve to the right by more than $200 billion due to the multiplier effect, where initial government spending leads to increased income and consumption, further amplifying the initial impact on aggregate demand.

An Increase in Government Purchases of $200 Billion Will Shift