How does increasing government spending affect aggregate demand in the economy?

Question

I’ve looked online but I can’t seem to find a clear answer. Thanks

In: Economics

Answer 1

If the government increases spending, then they are creating more aggregate demand for goods and services that they consume… if they buy new Tahoes for National Park rangers, and missiles, and upgrade computers at the Dept. of Agriculture those all create demand for those goods. Additionally, the companies supplying those goods, selling those goods, pay their workers who then have money to spend on whatever it is that they need/want. They factory worker building missiles picks up overtime shifts to pay for his family’d Disney vacation. The Wyoming Chevy dealer that sold 10 trucks for use in Yellowstone buys a new pair of cowboy boots. The sales rep at Dell decides to move to a nicer apartment.