Starting from Long-Run Equilibrium, a Large Decrease in Government Purchases

question 5

Multiple Choice

Starting from long-run equilibrium, a large decrease in government purchases will result in a(n) ______gap in the short run and ____inflation and ____output in the long run.

• A)expansionary; higher; potential
• B)recessionary; lower; potential
• C)expansionary; higher; higher
• D)recessionary; higher; potential

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Definitions:

Financing Activities

Transactions and events that affect a company's capital structure, including borrowing, repaying debt, issuing equity, and paying dividends.

Statement Of Cash Flows

A financial statement that summarizes the amount of cash and cash equivalents entering and leaving a company.

Spreadsheet Approach

Refers to the use of spreadsheet software to model and analyze financial data, often used in budgeting, forecasting, and financial analysis.