An Increase in Government Spending Initially and Primarily Shifts

question 52

Multiple Choice

An increase in government spending initially and primarily shifts

• A)aggregate demand to the right.
• B)aggregate demand to the left.
• C)aggregate supply to the right.
• D)neither aggregate demand nor aggregate supply in either direction.

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Definitions:

Increases the Money Supply

A monetary policy action that makes more money available in the economy, typically intended to stimulate economic growth.

Money Multiplier

The ratio that measures the amount of money that banks are able to create with each unit of central bank reserves.

Spending Multiplier

The ratio of the change in total income to the initial change in spending that brought it about, illustrating how initial spending leads to further spending in the economy.

Expansionary Monetary Policy

A form of monetary policy where the central bank increases the money supply to stimulate economic activity, typically by lowering interest rates.