A Temporary Increase in Government Purchases Does Not Increase the Real

question 15

Multiple Choice

A temporary increase in government purchases does not increase the real wage according to the market clearing model because:

• A)labour supply and labour demand increase about the same amount.
• B)labour supply is fixed.
• C)labour demand is downward sloping.
• D)neither labour demand nor labour supply shift due to the permanent increase in government purchases.

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