Suppose the Economy Is Initially in Long-Run Equilibrium

question 55

Multiple Choice

Suppose the economy is initially in long-run equilibrium. Then suppose there is an increase in military spending due to rising international tensions. According to the model of aggregate demand and aggregate supply, what happens to prices and output in the short run?

• A) Prices fall; output rises.
• B) Prices fall; output falls.
• C) Prices rise; output falls.
• D) Prices rise; output rises.

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Definitions:

Neurotransmitters

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Biological Psychologist

A specialist who studies the link between biological processes and behaviors, often focusing on the brain and nervous system.

Neurotransmitter Abnormalities

Irregularities or imbalances in the chemical messengers used by the nervous system to communicate between neurons.

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Individuals diagnosed with depression, a mood disorder characterized by persistent feelings of sadness, apathy, and loss of interest.