Suppose the Government Permanently Reduces Spending in an Effort to Reduce

question 21

Multiple Choice

Suppose the government permanently reduces spending in an effort to reduce the budget deficit. In the new long-run equilibrium, output will ________ and the price level will ________.

• A) decrease; decrease
• B) remain unchanged; decrease
• C) remain unchanged; increase
• D) decrease; remain unchanged
• E) increase; decrease

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