Figure 34-8
-Refer to Figure 34-8. An increase in government purchases will
A) shift aggregate demand from AD1 to AD2.
B) shift aggregate demand from AD1 to AD3.
C) cause movement from point A to point B along AD1.
D) have no effect on aggregate demand.

Question

Figure 34-8 
-Refer to Figure 34-8. An increase in government purchases will
A) shift aggregate demand from AD1 to AD2. 
B) shift aggregate demand from AD1 to AD3. 
C) cause movement from point A to point B along AD1. 
D) have no effect on aggregate demand.

Quizplus · Accepted Answer

An increase in government purchases will shift the aggregate demand curve from AD1 to AD2, as shown in the diagram. This is because an increase in government purchases will increase GDP and shift the AD curve to the right.

Figure 34-8 -Refer to Figure 34-8. an Increase in Government Purchases Will