In the Short Run, When Government Purchases Fall, Income and Hence

Multiple Choice

In the short run, when government purchases fall, income and hence consumption fall, so

A) real GDP falls by more than the fall in government purchases.
B) both real GDP and potential GDP fall by the same amount as the fall in government purchases.
C) real GDP falls by the same amount as the fall in government purchases.
D) real GDP falls by less than the fall in government purchases.
E) both real GDP and potential GDP fall by more than the fall in government purchases.