Consider a hypothetical country in which, initially, real GDP equals potential GDP. Suppose that the government purchases increase. All else equal (with regard to the AD-IA model), relative to the baseline level, in the long run, consumption is: A. higher. B. lower. C. the same.
Consider a hypothetical country in which, initially, real GDP equals potential GDP. Suppose that the government purchases increase. All else equal (with regard to the AD-IA model), relative to the baseline level, in the long run, consumption is: A. higher. B. lower. C. the same.
Chapter9: Demand-side Equilibrium: Unemployment Or Inflation?
Section: Chapter Questions
Problem 4TY
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![Consider a hypothetical country in which,
initially, real GDP equals potential GDP.
Suppose that the government purchases
increase. All else equal (with regard to the
AD-IA model), relative to the baseline level,
in the long run, consumption is:
A. higher.
B. lower.
C. the same.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F3f5c36ec-bd6b-4db2-8acc-f7932ac8f873%2Faab65707-d72d-45f0-8d2e-c7135f6c3874%2F08gj1xn_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Consider a hypothetical country in which,
initially, real GDP equals potential GDP.
Suppose that the government purchases
increase. All else equal (with regard to the
AD-IA model), relative to the baseline level,
in the long run, consumption is:
A. higher.
B. lower.
C. the same.
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