What Would Happen to Aggregate Demand (AD)if the Federal Government

Multiple Choice

What would happen to aggregate demand (AD) if the federal government increased military purchases and provincial and local governments decreased their road building budgets at the same time?

A) AD would increase, because only federal government purchases affect AD.
B) AD would increase if the change in federal purchases were smaller than the change in provincial and local purchases.
C) AD would decrease, because only provincial and local government purchases affect AD.
D) AD would decrease if the change in federal purchases were smaller than the change in provincial and local purchases.