Suppose the Economy Is Initially in Long-Run Equilibrium

question 147

Multiple Choice

Suppose the economy is initially in long-run equilibrium. Which of the following events leads to an increase in the price level and a decrease in real GDP in the short run?

• A) A decrease in health insurance premiums paid by firms raises the cost of employing labor
• B) An increase in government transfer payments
• C) An increase in the cost of a key input such as oil
• D) A sharp fall in stock market prices

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Definitions:

Stereotype

A generalization about a group’s characteristics that does not consider any variations from one individual to another.

Person Perception

The processes by which an individual uses social stimuli to form impressions of others.

Bystander Effect

The tendency of an individual who observes an emergency to be less likely to help when other people are present than when the observer is alone.

Self-Fulfilling Prophecy

Social expectations that cause an individual to act in such a way that the expectations are realized.