Suppose the Economy Is in Long-Run Equilibrium

question 92

Multiple Choice

Suppose the economy is in long-run equilibrium. In a short span of time, there is a sharp increase in the minimum wage. In the short run, what would we expect to happen?

• A) the price level to rise, and real GDP to fall
• B) the price level to fall, and real GDP to remain unchanged
• C) the price level to remain unchanged, and real GDP to fall
• D) the price level to fall, and the real GDP to rise the same

Analyze the effects of government policies such as subsidies, production quotas, and specific taxes on market outcomes.

Explain the impact of elasticity on tax incidence and market outcomes.

Calculate and interpret equilibrium price and quantity in free markets and under government intervention.

Evaluate the welfare implications of trade restrictions and government interventions in the market.

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Definitions:

U.S. Constitution

The supreme law of the United States that outlines the national frame of government and the fundamental rights of its citizens.

Necessary and Proper Clause

A provision in the U.S. Constitution granting Congress the power to pass all laws deemed necessary and proper for executing its enumerated powers.

Full Faith and Credit Clause

A constitutional mandate requiring states to recognize and respect the public records, judicial proceedings, and legislative acts of other states.

Brady Handgun Violence Prevention Act

Federal legislation that requires background checks on individuals before a firearm purchase to prevent firearms sales to prohibited buyers.