In the aggregate expenditures model, an increase in government spending will:
A)decrease real GDP.
B)increase output and employment.
C)shift the aggregate expenditures schedule downward.
D)do all of the above.

Question

Quizplus · Accepted Answer

An increase in government spending will increase the aggregate demand, shifting the aggregate expenditures schedule upward. This will lead to an increase in output and employment as firms increase production to meet the higher demand. Therefore, choice B is the correct answer.

In the Aggregate Expenditures Model, an Increase in Government Spending