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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