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Starting from Long-Run Equilibrium, a Large Tax Increase Will Result

Question 56

Multiple Choice

Starting from long-run equilibrium, a large tax increase will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.


A) expansionary; higher; potential
B) recessionary; lower; lower
C) expansionary; lower; potential
D) recessionary; lower; potential

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