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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Definitions:

Design Capacity

The maximum output rate or service capacity an operation, process, or facility is designed to achieve under ideal conditions.

Effective Capacity

The maximum output that a system can sustain under normal conditions, taking into consideration the limitations such as quality standards and scheduled downtime.

Orientation Session

A meeting or seminar designed to introduce new members, employees, or participants to organization policies, goals, and procedures.