Question : An increase in government expenditure can shift the aggregate demand curve to the:
Option 1: Right
Option 2: Left
Option 3: Upward
Option 4: Downward
Correct Answer: Right
Solution : The correct answer is (a) right.
Government expenditure is one of the components of aggregate demand (AD), along with consumption, investment, and net exports. An increase in government expenditure means that the government is spending more on goods, services, infrastructure, or transfer payments.
When government expenditure increases, it directly adds to the total spending in the economy. This increase in spending leads to an increase in aggregate demand, shifting the aggregate demand curve to the right. The rightward shift indicates that at each price level, a higher quantity of goods and services is demanded.
Question : In the long run, the aggregate supply curve is:
Option 1: Vertical
Option 2: Horizontal
Option 3: Upward-sloping
Option 4: Downward-sloping
Question : In the short run, the aggregate supply curve is:
Question : How does the demand curve look?
Option 1: Slopes upward from left to right
Option 2: Slopes downward from left to right
Option 3: Slopes downward from right to left
Option 4: None
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