In the long run, an increase in government spending, other things equal, generates
A)a higher real GDP in the long run.
B)a lower real GDP in the short run.
C)a higher price level.
D)both a higher real GDP and a lower price level.

Question

Quizplus · Accepted Answer

In the long run, an increase in government spending can lead to a higher price level due to increased aggregate demand, which can cause inflationary pressures. Real GDP is determined by factors like technology and resources, not government spending, in the long run.

In the Long Run, an Increase in Government Spending, Other