What would happen to aggregate demand if the federal government ...

[james9437]

What would happen to aggregate demand if the federal government increased military purchases and state and local governments increased their road building budgets at the same time?
 a. AD would increase.
 b. AD would increase, because only federal government purchases affect AD.
 c. AD would increase only if the change in federal purchases were smaller than the change in state and local purchases.
  d. AD would decrease only if the change in federal purchases was smaller than the change in state and local purchases.

Question 2

The spending multiplier equals 1/marginal propensity to save if an economy:
 a. has a trade surplus.
  b. is open to international trade.
  c. does not trade with any other country.
  d. has a higher level of saving than consumption.
  e. reduces its investment expenditures to zero.

[l.stuut]

Answer to Question 1

a

Answer to Question 2

c

[james9437]

Thank you

[l.stuut]

Happy to help you