Which of the following best explains what will happen in the short run if government purchases increase?
A)Real GDP, consumption, and investment will increase.
B)Potential GDP will increase.
C)Real GDP and consumption will increase.
D)Real GDP will increase.
E)All of these

Question

Quizplus · Accepted Answer

In the short run, an increase in government purchases can lead to an increase in real GDP and consumption due to the multiplier effect. However, it might not necessarily increase investment and does not directly affect potential GDP, which is more related to factors like technology, labor, and capital.

Which of the Following Best Explains What Will Happen in the Short