Refer to the figure above. The massive increase in government spending during World War II moved the economy in the span of a few short years from mass unemployment and price stability to "overfull" employment. This situation can be best illustrated in the figure above as a: A) Shift from AD₂ to AD₁ B) Shift from AD₁ to AD₂ C) Movement along AD₁ from Q₄ to Q₁ D) Movement along AD₂ from Q₂ to Q₃

Question

Quizplus · Accepted Answer

The massive increase in government spending during World War II led to a rightward shift of the aggregate demand curve from AD₁ to AD₂, indicating an increase in both output (from Y1 to Y2) and the price level (from P1 to P2).

Refer to the Figure Above