(Solution) - Read the following sentence and explain whether the economic logic -(2025 Original AI-Free Solution)

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Read the following sentence and explain whether the economic logic is correct or incorrect: "If Iceland's government reduces its discretionary spending to balance the budget, then the nation's aggregate demand falls, causing the price index and real GDP to fall. But the reduction in prices causes the nation's aggregate supply to fall, thereby changing prices to a level that could be lower than, equal to, or higher than the original level."