Suppose That Real GDP Equals Potential GDP, but the Government

Multiple Choice

Suppose that real GDP equals potential GDP, but the government believes that the economy is in a below full-employment equilibrium. As a result, the government increases its expenditure on goods and services. In response to the government's fiscal policy

A) aggregate demand will increase.
B) an equilibrium with real GDP less than potential GDP will occur.
C) potential GDP decreases.
D) None of the above answers is correct.