If the GDP is at its potential level, then what is the long-run effect of an increase in government purchases (G)? Reduction of consumption, net exports and investment through the wealth, interest rate and international trade effects. Reduction of only investment through the interest rate effect. Reduction of only consumption and investment through the wealth and interest rate effects. Reduction of only net exports through the international trade effect. Reduction of only consumption through the wealth and interest rate effects.

In the long run, an increase in the money supply will lead toResponsesA  a decrease in velocity. a decrease in velocity.B an increase in velocity.an increase in velocity.C a decrease in real GDP.a decrease in real GDP.D an increase in real GDP.

The government increases unemployment benefits by $1 million and funds it entirely by raising taxes. The absolute value of the government purchases multiplier is 3, that of the tax multiplier is 2 and that of the transfer payment multiplier is also 2. What is the impact on GDP? GDP increases by $1 million GDP decreases by $1 million GDP increases by $3 million GDP does not change GDP decreases by $3 million

A new government decides to change the government expenditure model so that it represents a higher sensitivity of government spending to GDP changes, suggesting a more aggressive fiscal policy.The government spending now follows the equation:G=500+0.15Y.What are the immediate impacts on economic growth, budget balance and trade balance of this new policy? (4 points)

f the marginal propensity to save is 0.2 and the government decreases its purchases by $20 billion, then real GDP willDecrease by $25 billion.Decrease by $100 billion.Increase by $100 billion.Increase by $25 billion.

For each of the following events, explain the short-run and long-run effects on output and the price level, assuming policymakers take no action.a. The stock market declines sharply, reducing consumers’ wealth.b. The federal government increases spending on national defense.c. A technological improvement raises productivity.d. A recession overseas causes foreigners to buy fewer U.S. goods.