Imagine an economy on its production possibilities frontier. In the long run, what will happen to the equilibrium price level and equilibrium real GDP if the federal government decreases spending?
A.
The equilibrium price level increases while equilibrium real GDP decreases.
B.
The equilibrium price level decreases while equilibrium real GDP increases.
C.
The equilibrium price level and equilibrium real GDP increase.
D.
The equilibrium price level decreases and equilibrium real GDP is unchanged.
Exam No：AP Macroeconomics Problem Set 1 Year：2024 Question No：APMacroeconomics2024AP0136
Answer:
D
Knowledge points:
5.2 The Phillips Curve
Solution:
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