In an expansionary fiscal policy to overcome the current recession, the Federal Government increases its spending to impprove the nation's physical infrastructure (roads, airports, seaports, airports, etc)
I need help graphing this problem.
When there is an increase in government spending, the IS curve shifts to
the right. The amount of the income increase depends on the marginal
propensity to consume through the multiplier effect
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An expansionary fiscal policy will fully affect the demand side of the economy, because, increase in government expenditure injects more money in the economy via increase aggregate demand without disturbing the monetary variables. An increase in the quantity of money supplied at a given price level shifts the aggregate demand curve to the right by the multiplier times. This can be show with the help of the following diagram
So a shift in aggregate demand to the right ...
This job features expansionary fiscal policy.