Suppose that real GDP equals potential GDP, but the government believes that the economy is in a below full- employment equilibrium. As a result, the government increases its expenditure on goods and services. In response to the government's fiscal policy,

Question

Quizplus · Accepted Answer

When the government increases its expenditure on goods and services, aggregate demand increases, which can lead to an increase in real GDP.

Suppose That Real GDP Equals Potential GDP, but the Government