Suppose the Economy Is in Long-Run Equilibrium

question 63

Multiple Choice

Suppose the economy is in long-run equilibrium. Concerns about pollution cause the government to significantly restrict the production of electricity. At the same time, there is a sharp decline in the stock market. 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.

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Definitions:

Endorphins

Neurotransmitters produced by the brain that act as natural painkillers and also boost feelings of pleasure or well-being.

Gate-Control Theory

A theory proposing that the spinal cord contains a neurological "gate" that either blocks pain signals or allows them to pass to the brain.

Vestibular Senses

Refer to the sensory system that contributes to balance, spatial orientation, and coordination, primarily involving the inner ear.

Tactile Sense

The sense that allows individuals to perceive touch, texture, and pressure, primarily through skin contact.