Starting from long-run equilibrium,the long-run impact(s)of a war that increases government purchases,compared to the original equilibrium,would be
A) higher inflation.
B) higher output.
C) higher inflation and higher output.
D) lower inflation and lower output.
E) no change in inflation or output.

Question

Quizplus · Accepted Answer

In the long run, increased government purchases can lead to higher inflation as the economy adjusts back to its potential output, with prices rising due to increased demand. Output returns to its original level.

Starting from Long-Run Equilibrium,the Long-Run Impact(s)of a War That Increases