Assume an economy is in equilibrium at an output level of $1,500 billion. If government spending increases by $200 billion, then at the output level of $1,500 billion, there is

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Quizplus · Accepted Answer

An increase in government spending increases aggregate demand, leading to higher consumption at the current output level, causing an unplanned fall in inventories as businesses sell more than they anticipated.

Assume an Economy Is in Equilibrium at an Output Level