Aggregate demand ________ and shifts the AD curve ________ when ________.
A. increases; leftward; taxes increase
B. increases; rightward; foreign incomes increase
C. increases; rightward; government expenditure increases
D. increases; rightward; taxes increase
E. decreases; leftward; the price level rises
Answer: C. increases; rightward; government expenditure increases
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In equilibrium, the real value of household income must equal
A) the real value of output produced by firms. B) the real value of all expenditures. C) the sum of all goods produced in a year. D) net GDP.
Good A is a Giffen good. If the price of good A were to suddenly double, the income effect would cause the purchases of good A to increase by
A) more than double. B) exactly double. C) less than double. D) Any of the above are possible. E) none of the above