If government spending increases then, given the real interest rate,
A) the demand for goods increases more than one-for-one.
B) the demand for goods increases less than one-for-one.
C) the demand for goods is unchanged, due to crowding out.
D) the demand for goods increases one-for-one.
E) the demand for goods doubles.

Question

Quizplus · Accepted Answer

When government spending increases, the demand for goods typically increases by the same amount, assuming no other changes in the economy, leading to a one-for-one increase in demand.

If Government Spending Increases Then, Given the Real Interest Rate