Suppose the Economy Is Producing at the Natural Rate of Output

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 short run and ________ in the inflation rate in the short 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