In the Medium Run,an Increase in Government Spending That Causes

question 27

Multiple Choice

In the medium run,an increase in government spending that causes an increase in the budget deficit

• A)affects the level of output but not its composition.
• B)affects both the level and composition of output.
• C)will not affect the composition of output but will affect the price level.
• D)is neutral.
• E) none of the above

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Definitions:

Current Market

The existing state of the market, including current prices, volumes, and trends, reflecting the most recent period of trading.

TIPS Bond

Treasury Inflation-Protected Securities (TIPS) are U.S. government bonds that are indexed to inflation in order to protect investors from the negative effects of rising prices.

Coupon Rate

The annual interest rate paid by a bond issuer to its bondholders, expressed as a percentage of the bond's face value.

Inflation Rate

The speed at which prices for products and services ascend, resulting in a decline in how much can be bought.