The Canadian Government Increases Its Expenditure on Goods and Services

Multiple Choice

The Canadian government increases its expenditure on goods and services in a time of war or increased international tension.Starting from a position of long- run equilibrium, what effect does this event have on Canada's economy in the short run?

A) Real GDP increases and the price level rises.
B) Real GDP decreases and the price level falls.
C) Real GDP increases and the price level falls.
D) Real GDP decreases and the price level rises.
E) There is no change in either real GDP or the price level.