Question

Depending on which curve is affected by the government policy, shift either the AS curve or the AD curve to reflect the change that would successfully restore the natural level of output.

Answer 1

Aggregate demand curve will shift to the right.

Step-by-step explanation:

Aggregate demand (AD) curve is depicted as the curve which focuses on the supply and demand of all goods and services produced by an economy. AD curve also depicts the change in demands of goods and services in an economy at different price levels.

When the government spending, investment spending and consumption spending rises up then the AD curve shifts to the right, however, it will again shift back to left when the spending of these components falls down.

Hope this will help.