-Refer to Exhibit 11-1.The economy is currently at point 1.Suppose the federal government increases purchases and there is no crowding out.As a result,the aggregate demand (AD)curve in the exhibit A) maintains its present position at AD_1. B) shifts rightward,ideally so that it goes through point 2. C) shifts rightward,ideally so that it goes beyond point 2. D) shifts leftward. E) does not shift,but the SRAS curve will shift rightward so that it goes through point 3.

Question

Quizplus · Accepted Answer

When the federal government increases purchases and there is no crowding out, it directly increases aggregate demand. This results in a rightward shift of the AD curve, ideally moving the economy to a higher level of output and price, which is represented by point 2 in this context.