Suppose the Economy Is Initially in a Long-Run Macroeconomic Equilibrium

question 142

Multiple Choice

Suppose the economy is initially in a long-run macroeconomic equilibrium.A shock then hits the economy and we observe that the unemployment rate decreases and the price level increases.We can conclude that ________ has increased and there is now a(n) ________ gap.

• A)aggregate supply; inflationary
• B)aggregate demand; recessionary
• C)aggregate supply; recessionary
• D)aggregate demand; inflationary

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Definitions:

Investment Portfolio

A collection of investments held by an individual or institution, including stocks, bonds, real estate, and other assets.

Financial Assets

Assets that derive their value from a contractual claim on future cash flows or from owning equity instruments of another entity.

Variance

A statistical measure that represents the dispersion or spread of data points in a data set, indicating how far each number in the set is from the mean.

Standard Deviation

A measure of the dispersion or variability in a set of data points, indicating how much the values deviate from the mean.