Question

Suppose the federal government increases increases spending without also increasing increasing taxes. In a closed economy setting, this policy wil ______________ real GDP and ____________ raise lower not affect the price level in the short run.

Answer 1

Answer:

Increase; raise

Explanation:

A closed economy is a self sufficient economy. The goal of a closed economy is to provide domestic consumers with everything they need from within the country's borders.

If federal government increases spending without also increasing increasing taxes, real GDP will increase and raise price level in the short run.