Suppose Government Purchases Have Increased and the Economy Has Reached

question 76

Multiple Choice

Suppose government purchases have increased and the economy has reached a new long-run equilibrium. Which of the following best describes the new equilibrium?

• A)Consumers are worse off because taxes are higher.
• B)Nothing has changed because real GDP is again equal to potential GDP.
• C)The economy is growing more slowly because consumption is higher.
• D)The economy is better off because consumption is higher.
• E)The economy is growing more slowly because investment is lower.

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