If GDP Exceeds Its Full-Employment Level in the Short Run

question 40

Multiple Choice

If GDP exceeds its full-employment level in the short run, what will take place to restore general equilibrium?

• A)Price level will rise, causing LM to shift upward.
• B)Price level will rise, causing LM to shift downward.
• C)Price level will fall, causing LM to shift upward.
• D)Price level will fall, causing LM to shift downward.

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Definitions:

Liquidity

A measure of how quickly and easily assets can be converted into cash without significantly impacting their value.

Par Value

a nominal value assigned to a share of stock or a bond, often used in legal documents.

Common Stock

A type of equity security that represents ownership in a corporation, giving the holder a share in the company's profits through dividends and/or capital appreciation.