O 4/20/2016 11:55 PM A 68.3/100 4/20/2016 11:16 AM Gradebook Print Calculator Qu

Question

O 4/20/2016 11:55 PM A 68.3/100 4/20/2016 11:16 AM Gradebook Print Calculator Question 8 of 10 Map A pling Consider the AD-AS model where the economy is in a recession, operating at point A at an output level of YR. Show the effect of an increase in governme nt spending that is designed to increase the economy's output to its potential GDP Potential GDP Price level GDP If you need to reset the graph to its original state, click on the graph, and then click on the button that looks like this: O Previous Check Answer Next Ext Hint

Explanation / Answer

Ans: Increase in Govt spending will increase AD in the economy which will shift AD towards rightwards and AD will touch potential GDP.

Here is the process : rise in govt spending will raise investment which will generate more income which will create more demand in the economy which will ultimately shift AD towards rightwards.

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

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