An increase in government expenditure on goods and services leads to the
A)aggregate supply curve shifting rightward.
B)aggregate supply curve shifting leftward.
C)aggregate demand curve shifting rightward.
D)aggregate demand curve shifting leftward.
E)potential GDP increasing.

Question

Quizplus · Accepted Answer

An increase in government expenditure on goods and services leads to an increase in aggregate demand which shifts the aggregate demand curve rightward. This is because government expenditure on goods and services is one of the components of aggregate demand. Therefore, choice C is the best option.

An Increase in Government Expenditure on Goods and Services Leads