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- Subject
- Macroeconomic Policy Toolseconomics-mcqs › macroeconomic-policy-tools
- Published
- 31 May 2019
- Last updated
- 28 May 2026
Explanation
An increase in government spending directly boosts overall demand in the economy, causing the aggregate demand curve to move to the right. This reflects higher total expenditure at every price level. Aggregate supply is not immediately affected by such spending changes.
More Macroeconomic Policy Tools MCQs
Practice related questions from the same subject.
- 1.Which of the following functions as an automatic economic stabilizer?
- 2.If the government raises its spending by Rs16 billion and the multiplier effect outweighs the crowding out effect, what will be the impact on the economy?
- 3.Which economic phenomenon is illustrated when higher government spending boosts income, shifts the demand for money to the right, increases interest rates, and consequently reduces investment?
- 4.What is the effect of an increase in the marginal propensity to consume (MPC) on the multiplier?
- 5.What is the primary impact of an increase in the money supply?
- 6.In the context of Eurozone nations, which factor is most likely responsible for the downward slope of the aggregate demand curve?
- 7.On a graph where the interest rate is plotted on the vertical axis and the quantity of money on the horizontal axis, what happens to the quantity of money demanded when the interest rate rises?
- 8.How does an increase in the money supply affect the aggregate demand curve?
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