Suppose the economy was in equilibrium, and the national government increased spending by $200 billion. Monetarist theory would predict that:
a. Both consumption and investment will fall, and net exports will rise.
b. Consumption will fall, and both investment and net exports will rise.
c. Any increase in government spending will be offset dollar for dollar by reduction in private demand.
d. In the end, government spending, consumption, investment, and net exports will all settle back to their old position with no net change in any of them.
.C
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