As part of its expansionary fiscal measures, the government of South Africa through its finance minister hasincreased its budget expenditure to over R2.2 trillion for 2023 fiscal year. Assume all other things remain thesame, which of the following is likely to happen in the short run?a) Consumption and investment increase in the short run.b) Consumption does not change, but investment increases less than government spendingc) Consumption increases but investment decreases in the short run.d) Output increases by the amount that government spending increases.

When government spending increases, it directly contributes to aggregate demand (AD), leading to…

Answered: As part of its expansionary fiscal…

Macroeconomics: Principles and Policy (MindTap Course List)

13th Edition

ISBN:9781305280601

Author:William J. Baumol, Alan S. Blinder

Publisher:William J. Baumol, Alan S. Blinder

Chapter8: Aggregate Demand And The Powerful Consumer

Section: Chapter Questions

Problem 8DQ

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