What would happen to aggregate demand (AD)if the federal government increased military purchases and provincial and local governments decreased their road building budgets at the same time?
A)AD would increase if the change in federal purchases were greater than the change in provincial and local purchases.
B)AD would increase, because only federal government purchases affect AD.
C)AD would decrease if the change in federal purchases were greater than the change in provincial and local purchases.
D)AD would decrease, because only provincial and local government purchases affect AD.

Question

Quizplus · Accepted Answer

The change in federal purchases would increase AD, while the change in provincial and local purchases would decrease AD. If the change in federal purchases is greater than the change in provincial and local purchases, then the overall effect would be an increase in AD.

What Would Happen to Aggregate Demand (AD)if the Federal Government