In the aggregate expenditures model, an increase in government spending causes a(n):
A) upward shift in the aggregate expenditures curve.
B) downward shift in the aggregate expenditures curve.
C) leftward movement along the aggregate expenditures curve.
D) rightward movement along the aggregate expenditures curve.

Question

Quizplus · Accepted Answer

An increase in government spending will increase aggregate expenditures at every level of income, leading to an upward shift of the aggregate expenditures curve. This is because government spending is a component of aggregate demand and therefore contributes to total spending in the economy.

In the Aggregate Expenditures Model, an Increase in Government Spending