An increase in government spending on goods to build or repair infrastructure
A)shifts the aggregate demand curve to the right.
B)has a multiplier effect.
C)shifts the aggregate supply curve to the right,but this effect is likely more important in the long run.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

An increase in government spending on goods for building or repairing infrastructure not only increases the demand for goods and services (shifting aggregate demand curve to the right) but also has a multiplier effect, as the increased spending leads to increased incomes and in turn, increased consumption (which further shifts the aggregate demand curve to the right). Additionally, in the long run, the investment in infrastructure can increase productivity and potential output (shifting the aggregate supply curve to the right).

An Increase in Government Spending on Goods to Build or Repair