Suppose that govt spending on defense rises by $50 billion. What happens to the AD curve?
A. It shifts right by $50 billion at each price level.
B. It shifts right by more than $50 billion at each price level.
C. It shifts right by less than $50 billion at each price level.
D. The aggregate demand curve does not shift; the aggregate supply curve shifts right by $50 billion at each price level.
Answer: B. It shifts right by more than $50 billion at each price level.
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