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 long run,

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