Suppose that the federal administration plans to fight a deep ongoing recession

Question

Suppose that the federal administration plans to fight a deep ongoing recession with a nationwide plan of increasing infrastructure. Congress approves it and adjusts the budget accordingly to put the plan in motion immediately. Aggregate demand spending components include consumption (C), investment (I), government (G), and exports (X) minus imports (M). Analyze what the aggregate demand and aggregate supply model predicts about the infrastructure plan to answer the following three questions. 1. What happens to the level of G2. What likely happens to the 3. What likely happens to the level of unemployment? Or stany consiant (0)decrease () aggregate demand curver unemployment remains The curve remains in the same spot 0 The curve shilts to the right (an decreases unemployment increase in AD) The curve shifts to the left (a decrease in AD) O increases

Explanation / Answer

1) Increase in infrastructure will increase the government expenditure and G will increase.

Ans is +

2)Increase in Govt. Expenditure will increase the aggregate expenditure and will increase the aggregate demand and AD will shift to the right.

Ans is B

3)Increase in AD will increase the output and will increase the employment and unemployment decreases.

Ans is B

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.