Consider an initial IS-LM equilibrium point which corresponds to a point labeled "A" on the current AD curve.
-Refer to the information above.If government spending increases with no change in the price level,the resulting IS-LM equilibrium corresponds to a point in the AD diagram
A)which has moved downward along the same AD curve.
B)straight above A on a new AD curve.
C)straight below A on a new AD curve.
D)directly to the right of A on a new AD curve.
E)directly to the left of A on a new AD curve.

Question

Quizplus · Accepted Answer

An increase in government spending shifts the IS curve to the right, leading to a higher equilibrium income (or output) level at the same price level in the AD-AS framework. This is represented by a movement to the right along the same AD curve, indicating higher aggregate demand at the same price level.

Consider an Initial IS-LM Equilibrium Point Which Corresponds to a Point