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Question
In the long run, what effect does a governmentʹs deficit spending have on equilibrium real Gross Domestic Product (GDP)?
A) The governmentʹs deficit spending will increase equilibrium real Gross Domestic Product (GDP).
B) Deficit spending will decrease the nationʹs equilibrium real Gross Domestic Product (GDP).
C) Higher government deficits will not raise equilibrium Gross Domestic Product (GDP) above the full-employment level.
D) Equilibrium real Gross Domestic Product (GDP) will increase beyond the full-employment level and there will also be an inflationary effect.
Answer
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