QuestionAugust 6, 2025

Assume that the government increases its spending by 100 million to stimulate demand In the long run, the effect of this spending is to increase output by more than 100 million. increase output by 100 million. raise prices. increase unemployment.

Assume that the government increases its spending by 100 million to stimulate demand In the long run, the effect of this spending is to increase output by more than 100 million. increase output by 100 million. raise prices. increase unemployment.
Assume that the government increases its spending by 100 million to stimulate demand In the long run, the effect of this spending is to increase output by more than 100 million. increase output by 100 million. raise prices. increase unemployment.

Solution
4.7(268 votes)

Answer

raise prices. Explanation 1. Identify Economic Principle Government spending increases aggregate demand, leading to a multiplier effect. 2. Apply Multiplier Effect The initial increase in spending leads to further increases in consumption and investment, raising total output by more than the initial amount. 3. Consider Long-Run Effects In the long run, increased demand can lead to higher prices as resources become fully utilized.

Explanation

1. Identify Economic Principle<br /> Government spending increases aggregate demand, leading to a multiplier effect.<br />2. Apply Multiplier Effect<br /> The initial increase in spending leads to further increases in consumption and investment, raising total output by more than the initial amount.<br />3. Consider Long-Run Effects<br /> In the long run, increased demand can lead to higher prices as resources become fully utilized.
Click to rate:

Similar Questions