Assuming the multiplier effect but no crowding-out or investment-accelerator effects, what is the effect of a $300 billion increase in government expenditures on the aggregate demand or supply?
A)It shifts the aggregate demand right by more than $300 billion.
B)It shifts the aggregate demand right by less than $300 billion.
C)It shifts the aggregate demand right by exactly $300 billion
D)It shifts the aggregate supply left by more than $300 billion.

Question

Quizplus · Accepted Answer

The multiplier effect implies that an initial increase in government spending will lead to a larger overall increase in aggregate demand due to the subsequent rounds of increased consumption and investment.

Assuming the Multiplier Effect but No Crowding-Out or Investment-Accelerator Effects