Practice Quiz

CLEP Principles of Macroeconomics Exam Prep

Category - Macroeconomics

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When government spending (G) goes up, does the aggregate demand curve (AD) shift? If so, which way?
  1. No
  2. Yes. The curve shifts to the left.
  3. Yes. The curve shifts to the right.
  4. It is impossible to tell given the information.
Explanation
Answer - C - When government spending (G) goes up, the aggregate demand curve shifts to the right.

Key Takeaway: Remember that the AD curve always shifts when the various components of spending within the economy change. This could be from government, individual firms, consumption, and/or exports.
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