Spending on the national defence force is categorised as government purchases. How do increases in spending on defence affect the aggregate demand curve? a. This will move the economy down along a stationary aggregate demand curve. b. This will move the economy up along a stationary aggregate demand curve. c. This will shift the aggregate demand curve to the right. d. This will shift the aggregate demand curve to the left.
Question
Spending on the national defence force is categorised as government purchases. How do increases in spending on defence affect the aggregate demand curve?
a. This will move the economy down along a stationary aggregate demand curve.
b. This will move the economy up along a stationary aggregate demand curve.
c. This will shift the aggregate demand curve to the right.
d. This will shift the aggregate demand curve to the left.
Solution
The correct answer is c. This will shift the aggregate demand curve to the right.
Here's why:
Government purchases are a component of aggregate demand, which also includes consumer spending, investment, and net exports. When government spending increases, such as on defense, it directly increases aggregate demand.
An increase in aggregate demand, all else being equal, shifts the aggregate demand curve to the right. This is because at each price level, the quantity of goods and services demanded is now higher due to the increased government spending.
So, increases in defense spending will shift the aggregate demand curve to the right.
Similar Questions
Spending on the war in Afghanistan is essentially categorized as government purchases. How do increases in spending on the war in Afghanistan affect the aggregate demand curve?Question 2Answera.They will shift the aggregate demand curve to the left.b.They will move the economy down along a stationary aggregate demand curve.c.They will shift the aggregate demand curve to the right.d.They will move the economy up along a stationary aggregate demand curve.
In deriving the aggregate demand curve from the aggregate expenditures model,:Multiple choice question.a change in the price level will have no impact on the aggregate expenditures schedule.a decrease in the price level shifts the aggregate expenditures schedule upward so that the new equilibrium GDP is higher.an increase in the price level shifts the aggregate expenditures schedule upward so that the new equilibrium GDP is lower.an increase in the price level shifts the aggregate expenditures schedule upward so that the new equilibrium GDP is higher.
Which of the following would NOT cause a shift in the aggregate demand curve?Question 9Answera.changes in spending by consumersb.changes in spending by foreign buyers c.changes in spending by businessesd.changes in the prices of goods and servicese.changes in spending by the government
Based on the above figure, how does a decrease in government spending affect the aggregate expenditure line? a. It shifts the aggregate expenditure line downward. b. It shifts the aggregate expenditure line upward. c. It decreases the slope of the aggregate expenditure line. d. It increases the slope of the aggregate expenditure line.
Which of the following will result in a shift in the aggregate supply curve?Question 30Select one:a.changes in spending by businesses. b.changes in spending by foreign buyers.c.changes in spending by the government.d.changes in spending by consumers.e.changes in input prices.
Upgrade your grade with Knowee
Get personalized homework help. Review tough concepts in more detail, or go deeper into your topic by exploring other relevant questions.