If the price level is fixed, then an increase in government spending will lead to
A)a larger increase in nominal GDP than in real GDP.
B)a smaller increase in nominal GDP than in real GDP.
C)no increase in either nominal GDP or real GDP.
D)an increase in nominal GDP by the same amount as an increase in real GDP.

Question

Quizplus · Accepted Answer

When the price level is fixed, any increase in government spending will lead to an equal increase in both nominal and real GDP, as there is no change in prices to affect the nominal GDP.

If the Price Level Is Fixed, Then an Increase in Government