Using the AD-AS model, an increase in government expenditure
A. has no impact on real GDP.
B. has no impact on real GDP, but will increase potential GDP.
C. increases both real GDP and the price level.
D. has a full multiplier effect on real GDP, leaving the price level unchanged in the long run.
Answer:C
Using the AD-AS model, an increase in government expenditure
A. has no impact on real GDP. B. has no impact on real GDP, but will increase potential GDP. C. increases both real GDP and the price level. D. has a full multiplier effect on real GDP, leaving the price level unchanged in the long run.