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JAMB Economics 1998 Question 36

Question 36

Public Finance

An increase in government expenditure will lead to

  1. A.investment opportunities for foreign investors
  2. B.an increase in the level of aggregate demand
  3. C.an increase in total tax revenue
  4. D.reduction in total tax revenue.
Show the answer and explanation

Answer: B (an increase in the level of aggregate demand)

Explanation

Government spending is part of aggregate demand (C + I + G + X − M), so more spending raises it.