The following events have occurred at times in the history of the United States:

Question

The following events have occurred at times in the history of the United States: 1. The world economy goes into an expansion. 2. Canadian businesses expect future profits to rise. 3. The govenment increases its expenditure on goods and services in a time of war or increased international tension. Starting from a position of long-run equilibrium, a worldStarting from a position of long-run equilibrium, an expansionand an increase in expected future increase in govenment expendituresreal GDP profits and the price level. ?A. decreases real GDP and raises the price level; () A. increases real GDP and raises the price level O B. increases real GDP and raises the price level:O c. increases; real GDP and lowers the price level ° C. increases real GDP and lowers the price level; 0 D, increases real GDP and raises the price level; decreases real GDP and raises the price levelO increases real GDP and raises the price level increases real GDP and raises the price level increases real GDP and lowers the price level B. decreases real GDP and lowers the price level D. decreases real GDP and raises the price level

Explanation / Answer

All events would have a positive effect on aggregate demand.

1) option B is correct

increases real GDP and raises the price level.

2) option A is correct

increases real GDP and raises the price level.

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