Suppose Government Purchases Have Decreased and the Economy Has Reached

question 75

Multiple Choice

Suppose government purchases have decreased and the economy has reached a new long-run equilibrium. Which of the following best describes the new equilibrium?

• A)Nothing has changed because real GDP is again equal to potential GDP.
• B)Consumers are better off because taxes are lower.
• C)The economy is growing more rapidly because investment is higher.
• D)The economy is better off because consumption is higher.
• E)The economy is growing more slowly because consumption is higher.