Suppose output exceeds potential output and contractionary fiscal policy is enacted. According to the AS/AD model, in the long run, this fiscal policy will produce:
A. a lower price level than would otherwise have occurred if no action were taken.
B. a lower output level and a lower price level than would have occurred if no action were taken.
C. neither a lower price level nor a lower output level than would otherwise have occurred if no action were taken.
D. a lower output level than would otherwise have occurred if no action were taken.
Answer: A
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