Question

Which of the following will generate an increase in aggregate​ demand? A. Government spending for the onset of a war. B. An increase in the foreign exchange value of the dollar. C. A decrease in the price level. D. A tax increase.

Answer 1

A. Government spending for the onset of a war.

Step-by-step explanation:

If government spending increases, money supply would increase. When money supply increases, people would have more money and as a result, demand would increase.

A rise in foreign exchange value makes goods and services more expensive to foreigners and therefore export would fall and so would aggregate demand.

A decrease in price level would lead to an increase in aggregate output demanded.

A rise in tax would reduce disposable income and aggregate demand would fall.