what-is-the-relationship-between-government-spending-household-consumption-and-a

Question

What is the relationship between government spending, household consumption, and aggregate demand in the context of the multiplier effect?

Accepted Answer

Increased government spending raises household income, leading to higher consumption and a rightward shift in aggregate demand.

Answer

Government spending only affects aggregate supply, not aggregate demand.

Answer

Increased government spending lowers household income, leading to lower consumption and a leftward shift in aggregate demand.

Answer

Government spending has no impact on household consumption or aggregate demand.