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

question 59

Multiple Choice

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

• A) The government's 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) Equilibrium real Gross Domestic Product (GDP) will increase beyond the full-employment level and there will also be an inflationary effect.