ECONOMICS
AGGREGATE DEMAND
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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taxes
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government spending
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the federal funds rate
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reserve requirements
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the discount rate
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Detailed explanation-1: -Aggregate demand increases with increase in investment.
Detailed explanation-2: -Increased government spending is likely to cause a rise in aggregate demand (AD). This can lead to higher growth in the short-term. It can also potentially lead to inflation.
Detailed explanation-3: -Answer and Explanation: The correct answer is A. A decrease in price level. Aggregate demand shifts favorably when the money supply increases and enable more consumer purchasing power.
Detailed explanation-4: -Changes in Government Purchases. All other things unchanged, a change in government purchases shifts the aggregate expenditures curve by an amount equal to the change in government purchases. A $200-billion increase in government purchases, for example, shifts the aggregate expenditures curve upward by $200 billion.
Detailed explanation-5: -An increase in government spending is one of the factors that economists say can drive inflation. Other factors include interest rates, monetary policy, supply chain disruptions and fluctuations in demand for goods and services. Inflation can be an important consideration for investing, saving and borrowing.