An increase in government spending initially and primarily shifts

aggregate demand right

aggregate demand left

aggregate supply right

neither aggregate demand nor aggregate supply

Solutions

Expert Solution

Aggregate demand (AD) = Consumption + Government spending + Private Investment + Exports - Imports

As Government spending and AD have positive relationship with each other, rise in government spending will raise the AD and shifts the demand curve to its right and upward. Thus option A is correct.

Rahul Sunny answered 1 year ago

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