The Equilibrium Effects of a Temporary Increase in Government Spending

question 60

Multiple Choice

The equilibrium effects of a temporary increase in government spending include

• A) an increase in the real wage and an increase in the real interest rate.
• B) an increase in the real wage and a decrease in the real interest rate.
• C) a decrease in the real wage and an increase in the real interest rate.
• D) a decrease in the real wage and a decrease in the real interest rate.
• E) real wages and the real interest rate remaining unchanged.

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Definitions:

Longshore Current

A current that runs parallel to the shore, generated by waves hitting the shoreline at an angle.

Spit

A small point or low ridge of sand or gravel projecting from the shore into a body of water.

Wave-cut Platform

A flat, often wide area at the base of a cliff created by the erosion of waves at the shore.

Estuaries

Coastal bodies of water where fresh water from rivers meets and mixes with salt water from the ocean.