Question

Assume wages and resource prices are flexible and the economy reached long-run equilibrium. What would be the long-run equilibrium output if there was an increase in government spending

Answer 1

Answer: If there is an increase in spending, it would affect the economy, because there is supposed to be an equality in the revenue generated and the cost

Explanation:

The long-run equilibrium can be described when a perfectly competitive market occurs having marginal revenue equating marginal costs, which is also equal to average total costs.

If there is an increase in spending, it would affect the economy, because there is supposed to be an equality in the revenue generated and the cost but in situations where cost exceeds economy, there would be an effect