Suppose, for a Certain Economy, Real and Potential GDP Are

Multiple Choice

Suppose, for a certain economy, real and potential GDP are initially equal. Then government purchases permanently increase. Compared to the baseline, we would expect to see, in the medium run,

A) a decrease in consumption and an increase in both net exports and investment.
B) a decrease in consumption, investment, and net exports.
C) an increase in consumption, a decrease in net exports, and no change in investment.
D) an increase in consumption and net exports and a decrease in investment.
E) an increase in consumption and a decrease in both net exports and investment.