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If the government purchases increase, then the planned expenditure line:remains the same.is indeterminate.shifts downward.shifts upward.

Question

If the government purchases increase, then the planned expenditure line:

  • remains the same.
  • is indeterminate.
  • shifts downward.
  • shifts upward.
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Solution

Shifts upward.

Here's why:

  1. Government purchases are a component of a country's total planned expenditure. Other components include consumer spending, investment spending, and net exports.

  2. When the government increases its purchases, it is essentially increasing its spending. This means that the total planned expenditure of the country increases.

  3. On a graph where the vertical axis represents the total planned expenditure and the horizontal axis represents the national income, an increase in the total planned expenditure would cause the planned expenditure line to shift upward.

  4. Therefore, if the government purchases increase, the planned expenditure line shifts upward.

This problem has been solved

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