If the Government Increases Aggregate Demand When the Economy Is

question 190

Multiple Choice

If the government increases aggregate demand when the economy is at both short-run and long-run equilibrium, the full long-run effect of this fiscal policy will be to

• A) increase real Gross Domestic Product (GDP).
• B) increase the price level.
• C) increase either the real Gross Domestic Product (GDP) or the price level, depending on the length of the time lag.
• D) decrease both real Gross Domestic Product (GDP) and the price level.

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Definitions:

Analyzed

The process of examining data or a financial statement in detail to extract insights or identify trends.

Effect

The impact or outcome that results from a specific cause or action, often analyzed in studies to understand causal relationships.

Ledger Accounts

Records that summarize the transactions related to a particular item over a period, creating a record of each financial transaction that takes place.

Transferred

The act of moving assets, funds, or rights from one account, location, or ownership to another.