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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) Government 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) Higher government deficits will raise equilibrium Gross Domestic Product (GDP) above the full-employment level and also have an inflationary effect.
Answer
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