What Would Happen to Aggregate Demand If the Federal Government

question 202

Multiple Choice

What would happen to aggregate demand if the federal government increased military purchases and state and local governments decreased their road building budgets at the same time?

• A)​AD would increase, because only federal government purchases affect AD.
• B)​AD would decrease, because only state and local government purchases affect AD.
• C)​AD would increase if the change in federal purchases were smaller than the change in state and local purchases.
• D)​AD would decrease if the change in federal purchases was smaller than the change in state and local purchases.

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