-Based on the Diagram Above,starting from a Long-Run Equilibrium at Point

question 182

Multiple Choice

-Based on the diagram above,starting from a long-run equilibrium at point C,a decrease in government spending that decreases aggregate demand from ADI¹ to ADI will lead to a short-run equilibrium at ________,creating _________ gap.

• A) D;an expansionary
• B) D;a recessionary
• C) D;no output
• D) B;an expansionary
• E) B;a recessionary

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Definitions:

Short Run

In economics, a period during which at least one of a firm's inputs is fixed and cannot be changed.

Fixed Input

An input in the production process that cannot be changed in the short term, such as buildings or land.

Long-Run Adjustment

A process in which firms adjust their inputs and outputs to achieve the optimal level of production and efficiency over an extended period.

Farmer

An individual engaged in the activity of agriculture, aiming to produce crops and raise livestock for consumption or sale.