How can an increase in government spending affect the economy?

Government spending (G) is a component of aggregate demand. The aggregate demand (AD) equation is Y = C + I + G + NX. It measures the total demand for goods and services in the economy. Using a diagram we can draw AD and show how a shift in G will affect the macroeconomy. (show on diagram). Thus an increase in G increases inflation and national income by increasing aggregate demand.

Answered by Economics tutor

3131 Views

See similar Economics A Level tutors

Related Economics A Level answers

All answers ▸

Explain, using a diagram, how a firm might use third degree price discrimination to increase their profits.


What is elasticity of demand and how do you work it out?


How would a change in income affect the quantity demanded of an inferior good?


Discuss the perfect competition model?


We're here to help

contact us iconContact ustelephone icon+44 (0) 203 773 6020
Facebook logoInstagram logoLinkedIn logo

MyTutor is part of the IXL family of brands:

© 2026 by IXL Learning