The following events have oocurred at times in the history of the United States.

Question

The following events have oocurred at times in the history of the United States. 3. The government increases its expenditure on goods and services in a time of war or increased international tension. Event 1 0 A, 1. The world economy goes into an expansion. 2. U.S, businesses expect future profits to rise. Event 2 increases aggregate demand; increases aggregate demand B. decreases aggregate demand and short-run aggregate supply, increases short-run aggregate supply and decreases long-run aggregate supply C. decreases aggregate demand; increases short-run aggregate supply increases short-run aggregate supply; decreases short-run aggregate supply D. Event 3 ?A. increases aggregate demand O B. decreases aggregate demand O C. decreases aggregate demand and short-run aggregate supply O D. decreases short-run aggregate supply Click to select your answer

Explanation / Answer

The answer to all events is Increase in aggregate demand

Event 1 and Event 2 Option A, Event 3 option A

When world economy expands its income is increased and it demands US exports. Hence US net exports are higher and so its aggregate demand. When business expects higher profit in future they invest more which increases aggregate demand. When there is a fiscal expansion, aggregate demand is increased due to higher government spending.

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