Suppose the economy is in long-run equilibrium. If the federal government cuts government spending, which of the following is likely to result?
A) an increase in real GDP and an increase in the price level
B) an increase in unemployment and an increase in the price level
C) a decrease in unemployment and a decrease in the price level
D) a decrease in the price level and an increase in unemployment
Ans: D) a decrease in the price level and an increase in unemployment
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a. spread broadly among the U.S. population b. the inflationary impact of increased federal expenditures on the unemployed c. growing as the U.S. population ages d. especially felt by recent college graduates e. the lost output that results
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What will be an ideal response?