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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Definitions:

Extended

Pertaining to something that has been lengthened or stretched out.

Complementary

Elements, items, or substances that, when brought together, enhance each other's properties or complete something.

DNA

Deoxyribonucleic acid, a molecule that carries the genetic instructions used in the growth, development, functioning, and reproduction of all known living organisms and many viruses.

Codon

A sequence of three nucleotides in messenger RNA that specifies the addition of a particular amino acid in the synthesis of proteins.