In the Long-Run Model, an Increase in Government Purchases

question 36

Multiple Choice

In the long-run model, an increase in government purchases

• A) increases GDP and the price level.
• B) decreases GDP and the price level.
• C) leaves both GDP and the price level unchanged.
• D) increases nominal GDP.
• E) none of the above.

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Definitions:

Dishonor

In financial contexts, it refers to the refusal or inability to pay a bill of exchange, promissory note, or other negotiable instrument when due.

Warranty Liability

Liability that is attributed when the transfer of an instrument breaches a warranty associated with an instrument.

Transfer

The act of moving or conveying property or rights from one party to another.

Primary Liability

The obligation falls directly on the individual or entity primarily responsible for an obligation, especially in financial transactions.