Because it represents a completely separate section of the economy, government purchases do not often affect the other elements of aggregate demand: consumption, investment, and net exports.

Question

Quizplus · Accepted Answer

Government purchases can have a significant impact on other elements of aggregate demand. For example, if the government increases its purchases of goods and services, it may increase demand for those goods and services, which could lead to higher prices and reduced private consumption. Additionally, changes in government spending can indirectly impact investment and net exports through their effect on interest rates and exchange rates.

Because It Represents a Completely Separate Section of the Economy