An increase in government spending initially and primarily shifts

a. aggregate demand to the right.

b. aggregate demand to the left.

c. aggregate supply to the right.

d. neither aggregate demand nor aggregate supply in either direction.

Solutions

Expert Solution

Option A

An increase in government spending initially and primarily shifts aggregate demand to the right.
Government spending refers to the government's expenditure on public sector services or for their own consumption or Investments.
When government increases its spending, the aggregate demand in the Economy increases due to decline in government taxes and cost of living.

Rahul Sunny answered 1 year ago

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