0
What happens to the supply and demand curve in the long run when the government increases spending?
Wiki User
∙ 10y agoWant this question answered?
Be notified when an answer is posted
Add your answer:
Earn +20 pts
What happens to demand if income increases and commodity is normal?
Demand also increases.
How do changes in income affect the demand for a good?
Increases in income allow for more disposable income which increases spending and the demand for goods. Decreases in income conversely decreases disposable income which decreases spending.
Why would a government choose to spend more money than it collects in taxes during a recession or a depression?
Spending increases demand and can encourage economic growth.
What happens when the demand for a product decreases?
When demand decreases, supply increases.
What happens when demand of a good Increases?
Given supply, if demand of any good increases it raises the prices of the good.
How does large Government spending help the economy?
Government spending increases aggregate demand by giving money to individuals and business to hopefully spend.
What happens to aggregate demand if government spending on infrastructure increases?
The Aggregate demand will shift to the right. this is because the output increases as well as the price level. When taxes decrease, it causes the shift. Th short run and Long run will also increase
What happens to demand if income increases and commodity is normal?
Demand also increases.
How do changes in income affect the demand for a good?
Increases in income allow for more disposable income which increases spending and the demand for goods. Decreases in income conversely decreases disposable income which decreases spending.
Why would a government choose to spend more money than it collects in taxes during a recession or a depression?
Spending increases demand and can encourage economic growth.
What happens when the demand for a product decreases?
When demand decreases, supply increases.
What happens when demand of a good Increases?
Given supply, if demand of any good increases it raises the prices of the good.
A decrease in government spending will cause a?
decrease in aggregate demand
How can government budget deficit cause the level of interest rates to rise for an economy?
When price increases, interest rate tends to rise. Government budget deficit suggests high Government spending (G) which leads to the rightward shift of AD and hence the corresponding upward pressure on price. Interest rate is determined by the money demand and money supply, government budget deficit suggests that government is unable to tap into reserves to finance spending. They will have to borrow. This increases the demand for money and thus causing the interest rate to rise.
What makes increased government spending an effective tool for increasing demand?
By increasing government spending, you increase the demand for certain products because the government is looking to buy those products. The government can act as a consumer, and when a consumer spends more, the demand for goods and services is increased.
How did government spending affect the economy-?
Federal spending on forgein aid increased demand for U.S goods.
In an aggregate demand-aggregate supply diagram what will equal decreases in government spending and taxes do?
No effect. Spending will decrease Aggregate Demand, lower taxes will raise Aggregate Demand
