Suppose the Government Increases Its Expenditures by $100 Billion and Simultaneously

question 42

Multiple Choice

Suppose the government increases its expenditures by $100 billion and simultaneously reduces the money supply by $100 billion.We definitely know that

• A)equilibrium GDP will fall.
• B)equilibrium GDP will rise.
• C)the interest rate will rise.
• D)the interest rate will fall.

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Definitions:

Vertical Contracts

Agreements between companies at different levels of the supply chain, such as manufacturers and retailers, aimed at controlling prices or excluding competitors.

Costly Activities

Activities that involve a significant expenditure of resources such as time, money, or effort.

New Product

An item or service that has been recently developed or introduced to the market, offering new or improved features.

Minimum Wage Control

Regulatory measures that set the lowest hourly rate of pay that employers can legally offer their employees.