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.

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Definitions:

Fetal Alcohol Syndrome

A condition resulting from alcohol exposure during pregnancy, characterized by physical deformities, cognitive impairments, and behavioral issues in the offspring.

Binge Drinking

The consumption of an excessive amount of alcohol in a short period of time, typically on a single occasion, leading to acute intoxication.

Early Pregnancy

The initial stage of pregnancy from conception until the end of the first trimester.

Breech Births

Births in which the baby is delivered feet or buttocks first rather than the head.