Assuming no crowding-out,investment-accelerator,or multiplier effects,a $100 billion increase in government expenditures shifts aggregate demand
A)right by more than $100 billion.
B)right by $100 billion.
C)left by more than $100 billion.
D)left by $100 billion.

Question

Quizplus · Accepted Answer

A $100 billion increase in government expenditures directly adds $100 billion to the AD (aggregate demand) as it is a component of AD. Assuming there are no other effects such as crowding-out, investment-accelerator, or multiplier effects, the shift in AD would be equal to the initial increase in government expenditures, which is $100 billion. Therefore, choice B is correct.

Assuming No Crowding-Out,investment-Accelerator,or Multiplier Effects,a $100 Billion Increase in Government