In the long run, what effect does a government's deficit spending have on equilibrium real Gross Domestic Product (GDP)?
A) Equilibrium real Gross Domestic Product (GDP) will increase beyond the full-employment level and there will also be an inflationary effect.
B) Higher government deficits will not raise equilibrium Gross Domestic Product (GDP) above the full-employment level.
C) Deficit spending will decrease the nation's equilibrium real Gross Domestic Product (GDP).
D) The government's deficit spending will increase equilibrium real Gross Domestic Product (GDP).
Question 2
A reduction in nominal wages will cause which of the following?
A) a leftward shift in the short-run aggregate supply curve to shift to the left
B) a movement along the short-run aggregate supply curve
C) a shift of both the short-run and long-run aggregate supply curves
D) a rightward shift in the short-run aggregate supply curve
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