Respuesta :
In this case, the price index decreases and the actual real GDP decreases.
GDP rises when purchases rise because leisure and consumption both fall, and leisure and labor input both rise.The multiplier of spending is less than one;that is, the rise in real GDP is less than the rise in government spending.The following is a brief summary of the balanced-budget multiplier:Production will rise at the same rate as spending and taxes are increased by the government.Keynesian economics says that government spending can be used to use up resources that aren't being used and increase output if the economy isn't producing enough to meet its potential.
Aggregate demand will rise as a result of increased government spending, which will raise real GDP and drive up prices.However, real GDP is calculated by dividing nominal GDP by the price index by 100.The base year's price index is set at 100 to make comparisons easier.Because prices were generally lower in the year before the base year, those GDP values must be inflated in order to compare them to the base year.
Learn about real gdp:
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