You know that Y = C+I+G+(X-M)

You know that Y = C+I+G+(X-M)
An example of an increase in G that was used by the U.S. Federal Government to fix the 2008 Great Recession is

Select one:

a. Increase in unemployment insurance benefits

b. Increase in interest payments on govt debt

c. Increase in social security benefits

d. Increase in spending on “shovel ready projects” by President Obama

Solutions

Expert Solution

The answer is (d)

Increase in spending on “shovel ready projects” by President Obama after the recession of 2008 is included as a government expenditure in the GDP as it leads to a creation of goods. Thus, it is an example of increase in G

(a) and (c) are wrong as these are transfer payments and not included in GDP

(b) is wrong as interest payments are not included in G of GDP.

Rahul Sunny answered 1 year ago

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