An increase in government spending initially and primarily shifts
A)aggregate demand to the right.
B)aggregate demand to the left.
C)aggregate supply to the right.
D)neither aggregate demand nor aggregate supply in either direction.

Question

Quizplus · Accepted Answer

When government spending increases, it leads to an increase in demand for goods and services, thus shifting the aggregate demand curve to the right. This is because the government is now buying more goods and services, which stimulates economic growth and encourages businesses to increase production to meet the increased demand.

An Increase in Government Spending Initially and Primarily Shifts