In the Long Run, What Effect Does a Government's Deficit

question 67

Multiple Choice

In the long run, what effect does a government's deficit spending have on equilibrium real Gross Domestic Product (GDP) ?

• A) Government deficit spending will increase equilibrium real Gross Domestic Product (GDP).
• B) Deficit spending will decrease the nation's equilibrium real Gross Domestic Product (GDP).
• C) Higher government deficits will not raise equilibrium Gross Domestic Product (GDP) above the full-employment level.
• D) Higher government deficits will raise equilibrium Gross Domestic Product (GDP) above the full-employment level and also have an inflationary effect.

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Definitions:

Red Light

A red light is commonly used in traffic signals to indicate a command to stop, or it can also refer to a wavelength of light perceived as red.

Conditioned Stimulus

A previously neutral stimulus that, after becoming associated with an unconditioned stimulus, evokes a conditioned response.

Neutral Stimulus

An object or event that initially produces no specific response other than focusing attention, until it is associated with a significant event.

Impending Occurrence

An event that is about to happen or is likely to happen shortly.