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Suppose the economy is in long - run equilibrium. Suppose the long - run aggregate - supply curve shifts $ 1 0 0 billion to
Suppose the economy is in longrun equilibrium. Suppose the longrun aggregatesupply curve shifts $ billion to the left. At the same time, government purchases increase by $ billion. If the marginal propensity to spend equals and the crowdingout effect is $ billion, what would we expect to happen in the long run to real GDP and the price level?
a Both real GDP and the price level would be higher.
b Both real GDP and the price level would be lower.
c Real GDP would be lower, but the price level would be higher.
d Real GDP would be lower, but the price level would be the same.
e None of the above
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