Suppose the Economy Is in Long-Run Equilibrium

question 112

Multiple Choice

Suppose the economy is in long-run equilibrium. If there is a sharp increase in the minimum wage as well as an increase in pessimism about future business conditions, what would we expect to happen in the short run?

• A) Real GDP will rise, and the price level might rise, fall, or stay the same.
• B) Real GDP will fall, and the price level might rise, fall, or stay the same.
• C) The price level will rise, and real GDP might rise, fall, or stay the same.
• D) The price level will fall, and real GDP might rise, fall, or stay the same.

---

Definitions:

Negligence

A failure to behave with the level of care that someone of ordinary prudence would have exercised under the same circumstances.

Strict Liability

A legal principle holding an individual or entity responsible for damages or injuries caused by their actions or products, regardless of negligence or intent.

Implied Warranty

An unwritten guarantee that the product or service being sold is fit for its intended purpose.

Express Warranty

A promise or guarantee made by a seller about the quality, function, or performance of a product, explicitly stated in the contract or sales agreement.