Suppose the Economy Is in Long-Run Equilibrium

question 158

Multiple Choice

Suppose the economy is in long-run equilibrium. If there is a sharp decline in the stock market combined with a significant increase in immigration of skilled workers, what would we expect to happen?

• A) In the short run, real GDP will rise, and the price level might rise, fall, or stay the same. In the long-run, real GDP will rise, and the price level might rise, fall, or stay the same.
• B) In the short run, the price level will fall, and real GDP might rise, fall, or stay the same. In the long-run, real GDP and the price level will be unaffected.
• C) In the short run, the price level will rise, and real GDP might rise, fall, or stay the same. In the long run, real GDP will rise, and the price level will fall.
• D) In the short run, the price level will fall, and real GDP might rise, fall, or stay the same. In the long run, real GDP will rise, and the price level will fall.

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Definitions:

Minimize Losses

Refers to the strategy of reducing the amount of money or resources wasted or not profitably used in a business or operation.

Output Units

Output units refer to the individual units of product or service produced by a business or economic system.

Purely Competitive Seller

A seller in a market where there are many buyers and sellers, with no single entity able to control the market price.

Average Variable Cost

The total variable cost of production divided by the quantity of output produced; it decreases and then increases as output increases due to economies and diseconomies of scale.