If government expenditure increases while other factors remain constant, what happens to aggregate demand?

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Multiple Choice

If government expenditure increases while other factors remain constant, what happens to aggregate demand?

Explanation:
Government spending is a component of aggregate demand (AD = C + I + G + NX). If G rises while everything else is held constant, total spending on goods and services in the economy goes up at every price level. This shifts the AD curve to the right, meaning aggregate demand increases. There can also be a multiplier effect—the initial rise in spending can lead to further rounds of spending as income increases and is spent, making the total rise in AD larger depending on how much people consume out of the extra income.

Government spending is a component of aggregate demand (AD = C + I + G + NX). If G rises while everything else is held constant, total spending on goods and services in the economy goes up at every price level. This shifts the AD curve to the right, meaning aggregate demand increases. There can also be a multiplier effect—the initial rise in spending can lead to further rounds of spending as income increases and is spent, making the total rise in AD larger depending on how much people consume out of the extra income.

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