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Macroeconomics

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Stabilization: Increase in Government Spending

MACRO-AGDEW1

Assume an upward sloping aggregate supply curve. Following an increase in government spending, which of the following will occur?

A

A decrease in aggregate supply with an increase in the price level.

B

A decrease in aggregate demand with a decrease in real GDP.

C

An increase in aggregate demand and an increase in the price level.

D

Decreases in both aggregate demand and in aggregate supply.

E

A decrease in real GDP.