Final answer:
An increase in government spending within an equilibrium circular-flow model will likely lead to economic growth due to the multiplier effect, where initial government spending generates a cycle of increased expenditures that lead to a greater increase in real GDP.
Step-by-step explanation:
If the circular-flow model is in equilibrium and there is an increase in government spending, holding everything else constant, we would anticipate that the outcome is likely to be economic growth. This growth is due to the multiplier effect, which ensures that an increase in spending leads to a larger increase in the equilibrium level of real GDP.
The reason for this is that when the government spends more, this initial spending is received as income by households or firms, who then spend it again, leading to a series of expenditures that are greater than the original amount. This cycle of spending contributes to increased aggregate demand in the economy, which in turn prompts firms to increase production and potentially leads to more jobs and income, thus further expanding the circular flow of economic activity.