If Government Purchases and Taxes Are Both Increased by the Same

Multiple Choice

If government purchases and taxes are both increased by the same lump sum, we can expect the following in the medium run:

A) output, prices, and interest rates will all remain unchanged
B) output, prices, and interest rates will all decrease
C) output, prices, and interest rates will all increase
D) output and prices will remain the same but interest rates will increase
E) output and prices will increase but interest rates will remain the same