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Hi tutors,
In the video: “National income, The circular flow of income, Aggregate supply and demand” part 1
There is a point at: 18:52 in the video stating that increased govt. spending leads to a rightward shift in demand.
Please can you explain what is the connection between increased government spending and demand?Thanks,
MD.If there were no government spending, let’s say on medicine, then the demand curve will show the relationship between price and quantity demanded by thr public. If the government were suddenly to start spending on medicine, then that simply represents additional demand at a given price. Hence the curve shifts to the right.
Thank you.
But what is it specifically about government spending that increases demand?
I can why understand the reason behind the other causes of a rightward shift on the same slide at 18:52 in the video but I just don’t understand the government spending part.Why would there be more demand if the government started to spend money on medicine?
Thanks,
MD
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