In the short run, an increase in government expenditure on goods and services ________ real GDP and ________ the price level.
A) increases; rises
B) increases; falls
C) decreases; rises
D) decreases; falls

Question

Quizplus · Accepted Answer

In the short run, an increase in government expenditure on goods and services typically leads to an increase in real GDP due to higher demand. This increased demand can also lead to higher prices, thus raising the price level.

In the Short Run, an Increase in Government Expenditure on Goods