Suppose Government Purchases Have Decreased and the Economy Has Reached

Multiple Choice

Suppose government purchases have decreased and the economy has reached a new long-run equilibrium. Which of the following best describes the new equilibrium?

A) Nothing has changed because real GDP is again equal to potential GDP.
B) Consumers are better off because taxes are lower.
C) The economy is growing more rapidly because investment is higher.
D) The economy is better off because consumption is higher.
E) The economy is growing more slowly because consumption is higher.