Starting from Long-Run Equilibrium, a Large Decrease in Government Purchases

Multiple Choice

Starting from long-run equilibrium, a large decrease in government purchases 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