In the long run, a decrease in government spending, other things equal, generates
A) a lower real GDP in the long run.
B) a higher real GDP in the short run.
C) a lower price level.
D) both a higher real GDP and a lower price level.

Question

Quizplus · Accepted Answer

In the long run, a decrease in government spending reduces aggregate demand, leading to a lower price level. Real GDP is determined by factors like technology and resources, not government spending, in the long run.

In the Long Run, a Decrease in Government Spending, Other