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Suppose the Economy Is Producing at the Natural Rate of Output

Question 3

Multiple Choice

Suppose the economy is producing at the natural rate of output. A decrease in consumer and business confidence will cause ________ in real GDP in the long run and ________ in the inflation rate in the long run, everything else held constant.


A) an increase; an increase
B) a decrease; a decrease
C) no change; an increase
D) no change; a decrease

Correct Answer:

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