Which of the following will lead to an increase in the gross domestic product of a country?
A) An increase in expenditure on investment goods
B) A fall in the expenditure on consumption
C) A fall in the expenditure incurred by the government
D) An increase in imports
Question 2
The Ricardian equivalence theorem suggests that an increase in the government budget deficit created by a tax cut will
A) decrease real Gross Domestic Product (GDP) in the short run, but increase it in the long run.
B) decrease real Gross Domestic Product (GDP) in both the short and long run.
C) increase real Gross Domestic Product (GDP) in both the short and long run.
D) have no effect on aggregate demand.
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