An increase in government spending can lead to an increase in aggregate demand (AD).Question 22Answera.Trueb.False
Question
An increase in government spending can lead to an increase in aggregate demand (AD).Question 22Answera.Trueb.False
Solution
a. True
An increase in government spending can indeed lead to an increase in aggregate demand (AD). This is because government spending is a component of AD. When the government spends more on goods and services, this directly increases demand. Furthermore, the money that the government spends often ends up in the hands of consumers (for example, through government salaries or social programs), who then spend that money themselves, further increasing demand.
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