Question

Starting from its potential output, an economy's government increases spending. In the long run, this economy will produce at: A. its potential output level, but at a lower aggregate price level. B. an output level that is greater than its potential output. C. an output level that is below its potential output. D. its potential output.

Answer 1

an output level that is greater than its potential output

Step-by-step explanation:

A grow in G (G=government expenditure) is drectly correlated to a grow in the production that if it is in the potetial output it will generate an output level that is greater than its potential output. This is called a Positive potential output GAP.