Assuming no crowding-out, investment-accelerator, or multiplier effects, how will a $200 billion increase in government expenditures shift aggregate demand?
A)It will shift aggregate demand right by more than $200 billion.
B)It will shift aggregate demand right by $200 billion.
C)It will shift aggregate demand right by less than $200 billion.
D)It will shift aggregate demand left by more than $200 billion.

Question

Quizplus · Accepted Answer

Assuming no crowding out, investment-accelerator, or multiplier effects, a $200 billion increase in government expenditures will directly increase aggregate demand by $200 billion. This is because government expenditure is a component of aggregate demand. Therefore, the correct option is B, which states that it will shift aggregate demand right by $200 billion.

Assuming No Crowding-Out, Investment-Accelerator, or Multiplier Effects, How Will a $200