Government Spending Shifts Aggregate Demand Rightward

Steps:

• Aggregate demand (AD) is total spending in an economy: AD = C + I + G + (X - M).
• Government spending (G) is a direct component of AD.
• Increasing G raises total spending, boosting AD at every price level.
• This causes an outward (rightward) shift of the AD curve.

Why D is correct:

• Per the AD formula, an increase in G shifts the entire AD curve right, as it elevates demand independently of price level changes.

Why the others are wrong:

• A: Describes a movement along the curve from higher prices reducing quantity demanded, not a spending increase.
• B: Indicates movement along the curve from lower prices increasing quantity demanded, unrelated to G.
• C: Reflects a leftward shift from reduced AD components like lower G or C.

Final answer: D