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

Question 5

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; potential
C) expansionary; higher; higher
D) recessionary; higher; potential

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