A change in government transfers shifts the aggregate demand curve by _____ than a change in government spending for goods and services and has a _____ effect on real GDP.
A)more; smaller
B)more; larger
C)less; smaller
D)less; larger

Question

Quizplus · Accepted Answer

A change in government transfers shifts the aggregate demand curve by less than a change in government spending because transfers are not directly spent on goods and services, leading to a smaller effect on real GDP.

A Change in Government Transfers Shifts the Aggregate Demand Curve