How does an increase in government spending affect the aggregate expenditure line?
A)It shifts the aggregate expenditure line upward.
B)It shifts the aggregate expenditure line downward.
C)It increases the slope of the aggregate expenditure line.
D)It decreases the slope of the aggregate expenditure line.
E)It shifts the aggregate expenditure line upward and increases its slope.

Question

Quizplus · Accepted Answer

An increase in government spending will directly increase the level of investment, consumption, and government expenditure in the economy, which collectively make up the aggregate expenditure. Therefore, increasing government spending will shift the aggregate expenditure line upward.

How Does an Increase in Government Spending Affect the Aggregate