Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Increase aggregate demand significantly
B
Decrease aggregate demand significantly
C
No change in aggregate demand
D
Increase aggregate supply
Understanding the Answer
Let's break down why this is correct
Answer
When the government significantly increases spending, it usually puts more money into the economy. This can increase aggregate demand, which is the total amount of goods and services people want to buy. If there is an external shock, like a natural disaster, the government might spend more to help rebuild and support affected communities. For example, if a hurricane damages homes, the government could invest in construction and relief efforts, creating jobs and boosting spending. This combination of increased government spending and the need for recovery can lead to a stronger demand for products and services, helping the economy to recover faster.
Detailed Explanation
When the government spends a lot of money, it puts more cash into the economy. Other options are incorrect because Some might think that spending less is needed after a disaster; It's easy to think that spending won't change anything.
Key Concepts
Fiscal Policy
External Shocks
Topic
Aggregate Demand and Supply Shifts
Difficulty
medium level question
Cognitive Level
understand
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