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

question 78

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; lower
• C)expansionary; lower; potential
• D)recessionary; lower; potential

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Definitions:

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