Using the AD-AS Model, an Increase in Government Expenditure

question 158

Multiple Choice

Using the AD-AS model, an increase in government expenditure

• A) has no impact on real GDP.
• B) has no impact on real GDP, but will increase potential GDP.
• C) increases both real GDP and the price level.
• D) has a full multiplier effect on real GDP, leaving the price level unchanged in the long run.

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Definitions:

Negligent Misrepresentation

A false statement made carelessly that is relied upon by others, leading to their financial loss.

Annullment

A legal procedure that declares a marriage null and void, as if it never legally existed, due to various possible reasons such as fraud or incapacity.

Intimidation

The act of instilling fear in others to force them to do or abstain from doing something against their will.

Voidable

A contract or agreement that is valid until one party decides to cancel or invalidate it due to certain legal deficiencies.