When Real GDP Is Less Than Potential GDP, an Increase

question 101

Multiple Choice

When real GDP is less than potential GDP, an increase in government expenditures will ________ real GDP and ________ the price level.

• A) increase; raise
• B) increase; lower
• C) decrease; raise
• D) decrease; lower

---

Definitions:

Vicious Circle

A complex chain of events that reinforces itself through a feedback loop, leading to a negative or undesirable outcome.

Foreign Aid Methods

Various strategies or approaches for providing assistance to countries and communities in need, including grants, loans, and technical support.

Delivering Funds

The process of transferring money from one party to another, which can occur through various methods such as electronic transfer, check, or cash.

Poor Individuals

Persons who lack sufficient financial resources or income to meet their basic living needs according to societal standards.