So if you clicked this, you're probably cramming for macro-econ right now. Same here. Anyways, could anyone explain to me why if the government spends more money during a deficit, either AS decreases or AD increases? Thanks. This appears a lot on the FRQ's btw...
If government increases its spending, and decreases it's taxes on Consumers/buisnesses, then GDP increases because the GDP is calculated by C + I + G + Xn. The C goes up due to consumers having more disposible income, I goes up due to buisnesses having more money to grow, and G goes up because, well, government is increasing spending. Thus AD goes up.
