Suppose the Economy Is Initially in Long-Run Equilibrium

question 32

Multiple Choice

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

Pia Mater

The inner membrane covering the brain and spinal cord; the innermost of the meninges; also see dura mater and arachnoid.

Arachnoid

The middle of the three meningeal layers that cover and protect the brain and spinal cord; see pia mater and dura mater.

Procedural Memory

A type of long-term memory that is responsible for knowing how to perform certain tasks without conscious awareness of the learning process.

Limbic System

A complex system of nerves and networks in the brain, involving several areas near the edge of the cortex and within the forebrain, responsible for the control of basic emotions and drives.