Suppose Government Purchases Have Increased and the Economy Has Reached

Multiple Choice

Suppose government purchases have increased and the economy has reached a new long-run equilibrium. Which of the following best describes the new equilibrium?

A) Consumers are worse off because taxes are higher.
B) Nothing has changed because real GDP is again equal to potential GDP.
C) The economy is growing more slowly because consumption is higher.
D) The economy is better off because consumption is higher.
E) The economy is growing more slowly because investment is lower.