Government spending:
A) tends to increase with increases in the price level.
B) tends to increase with decreases in the price level.
C) remains generally unaffected by changes in the price level.
D) is not a component of aggregate demand.

Question

Quizplus · Accepted Answer

Government spending is typically based on budget constraints and policy decisions, and is not directly tied to changes in the price level. Therefore, government spending remains generally unaffected by changes in the price level. Option D is incorrect because government spending is a key component of aggregate demand, along with consumer spending, investment, and net exports.

Government Spending