Suppose Output Exceeds Potential Output and Contractionary Fiscal Policy Is

Multiple Choice

Suppose output exceeds potential output and contractionary fiscal policy is enacted. According to the AS/AD model, in the long run, this fiscal policy will produce:

A) a lower output level and a lower price level than would have occurred if no action were taken.
B) a lower price level than would otherwise have occurred if no action were taken.
C) a lower output level than would otherwise have occurred if no action were taken.
D) neither a lower price level nor a lower output level than would otherwise have occurred if no action were taken.