Suppose the federal government increases spending without al

Suppose the federal government increases spending without also increasing taxes In a Closed economy setting this policy will real GDP and the price level in the short run.

Solution

Since government spending is a positive component of aggregate demand.So when government spending rises,aggregate demand curve shift to the right with no change in aggregate supply curve.So real GDP will rise as a result of this shift of AD curve to right and price level will also rise with this shift.