In the Short Run, When Government Purchases Fall, Income and Hence

question 40

Multiple Choice

In the short run, when government purchases fall, income and hence consumption fall, so

• A)real GDP falls by more than the fall in government purchases.
• B)both real GDP and potential GDP fall by the same amount as the fall in government purchases.
• C)real GDP falls by the same amount as the fall in government purchases.
• D)real GDP falls by less than the fall in government purchases.
• E)both real GDP and potential GDP fall by more than the fall in government purchases.

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