As part of its expansionary fiscal measures, the government of South Africa through its finance minister has increased its budget expenditure to over R2.2 trillion for 2023 fiscal year. Assume all other things remain the same, 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 spending c) Consumption increases but investment decreases in the short run. d) Output increases by the amount that government spending increases.

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
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As part of its expansionary fiscal measures, the government of South Africa through its finance minister has
increased its budget expenditure to over R2.2 trillion for 2023 fiscal year. Assume all other things remain the
same, 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 spending
c) Consumption increases but investment decreases in the short run.
d) Output increases by the amount that government spending increases.
Transcribed Image Text:As part of its expansionary fiscal measures, the government of South Africa through its finance minister has increased its budget expenditure to over R2.2 trillion for 2023 fiscal year. Assume all other things remain the same, 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 spending c) Consumption increases but investment decreases in the short run. d) Output increases by the amount that government spending increases.
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