Assume the economy is initially operating at the natural level of output. Now suppose a budget is passed that calls for a decrease in government spending. This fiscal contraction will, in the short run, cause a decrease in:
A) the output level.
B) the price level.
C) the nominal wage.
D) the interest rate.
E) All of the above.

Question

Quizplus · Accepted Answer

The Answer of Assume the economy is initially operating at the natural level of output. Now suppose a budget is passed that calls for a decrease in government spending. This fiscal contraction will, in the short run, cause a decrease in:
A) the output level.
B) the price level.
C) the nominal wage.
D) the interest rate.
E) All of the above.

Assume the Economy Is Initially Operating at the Natural Level