Starting from a Long-Run Equilibrium, a Reduction in Potential Output

question 135

Multiple Choice

Starting from a long-run equilibrium, a reduction in potential output leads to ________ gap in the short run and to a ________ rate of inflation in the long run.

• A)an expansionary; higher
• B)an expansionary; lower
• C)a recessionary; lower
• D)a recessionary; higher

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