Suppose that the economy is at full employment when government expenditure increases by $10 billion.In the long run

Question

Quizplus · Accepted Answer

In the long run, an increase in government expenditure, when the economy is already at full employment, does not change the real GDP because all resources are already fully utilized. Instead, it leads to an increase in the price level due to higher demand, resulting in inflation.

Suppose That the Economy Is at Full Employment When Government