Show diagrammatically the impact on equilibrium level of output of increased government spending.
The given figure illustrates how government spending affects equilibrium level of income. It is assumed that like investment expenditure, • government spending is also autonomous of the level of income or that it is constant amount. AD function C +1 + G is parallel to the AD function. Owing to upward shift in AD, equilibrium shifts from Ex to E. Equilibrium level of income increases from OL to O{{L}_{1}}
