Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
It shifts the aggregate demand curve to the left
B
It shifts the aggregate demand curve to the right
C
It has no effect on the aggregate demand curve
D
It causes a movement along the aggregate demand curve
Understanding the Answer
Let's break down why this is correct
Answer
When the government increases its spending, it usually leads to a rise in aggregate demand. This is because government spending injects money into the economy, which can create jobs and boost consumer confidence. As people earn more money, they tend to spend more on goods and services, which further increases demand. For example, if the government builds new schools, construction workers get paid, and they use that money to buy food, clothes, and other items. Overall, this increased spending shifts the aggregate demand curve to the right, indicating more demand for goods and services at every price level.
Detailed Explanation
When the government spends more money, it puts more cash into the economy. Other options are incorrect because Some might think that more spending means less demand; It's a common mistake to think spending has no effect.
Key Concepts
Shifts in Demand
Fiscal Policy
Topic
Aggregate Demand and Supply Analysis
Difficulty
medium level question
Cognitive Level
understand
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