In the Short Run, When Government Purchases Decrease, Real GDP

question 141

Multiple Choice

In the short run, when government purchases decrease, real GDP falls by more than the change in government purchases because

• A)prices increase.
• B)taxes increase.
• C)consumption decreases.
• D)investment decreases.
• E)taxes decrease.

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Definitions:

Arms-For-Hostages

Refers to the clandestine arrangement of trading arms for the release of hostages, notably associated with the Iran-Contra affair in the 1980s under the Reagan administration.

Oliver North

A former United States Marine Corps officer who was involved in the Iran-Contra Affair, a political scandal involving the secret sale of weapons to Iran and the diversion of funds to support Contra rebels in Nicaragua.

Yasir Arafat

A Palestinian political leader and the chairman of the Palestine Liberation Organization (PLO) from 1969 until his death in 2004, who played a central role in the Palestinian liberation movement.

Palestine Liberation Organization

A political and militant organization founded in 1964, claiming to represent the world's Palestinian people in their struggle for an independent state.