If the Government Increases Spending and There Is a Complete

question 8

Multiple Choice

If the government increases spending and there is a complete direct expenditure offset, then

• A) aggregate demand and real Gross Domestic Product (GDP) will not change.
• B) aggregate demand and real Gross Domestic Product (GDP) will increase by the amount of the spending increase.
• C) the price level will drop.
• D) the government spending multiplier will be greater than zero.