Suppose the Economy Is Initially in Long-Run Equilibrium

question 71

Multiple Choice

Suppose the economy is initially in long-run equilibrium. Now suppose oil prices rise sharply and at the same time, policymakers pursue expansionary monetary and fiscal policies. Which of the following will occur as a result of these two events, given that supply-side effects dominate demand-side effects?

• A) The price level will necessarily rise but the effect on output is indeterminate.
• B) Real GDP must necessarily fall but the effect on the price level is indeterminate.
• C) The price level and real GDP must rise.
• D) The price level must rise and real GDP must fall.

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Adulthood

A life stage characterized by full physical development, legal responsibility, and capability for mature relationships and decision-making.

Cardiovascular Fitness

The ability of the heart, blood cells, and lungs to supply oxygen-rich blood to the working muscle tissues and the ability of these tissues to use oxygen to produce energy for movement.

Muscle Mass

The total amount of skeletal muscle in the body, often associated with strength, metabolic rate, and physical fitness.

Osteoporosis

A medical condition characterized by weakened bones, increasing the risk of sudden and unexpected fractures.