Pessimism Suppose the Economy Is in Long-Run Equilibrium. Then Because of of Corporate

question 107

Multiple Choice

Pessimism
Suppose the economy is in long-run equilibrium. Then because of corporate scandal, international tensions, and loss of confidence in policymakers, people become pessimistic regarding the future and retain that level of pessimism for some time.


-Refer to Optimism.In the short run what happens to the price level and real GDP?

• A)both the price level and real GDP rise.
• B)both the price level and real GDP fall.
• C)the price level rises and real GDP falls.
• D)the price level falls and real GDP rises.

---

Definitions:

Long-Run Equilibrium

A state in which a market or economy has adjusted to all internal and external changes and forces, resulting in no incentive for allocation or production adjustments.

Rational Criterion

A standard or principle for making decisions based on logical and coherent reasoning, aimed at achieving the best possible outcome.

Process of Entry

refers to the steps or actions that need to be taken for a new competitor to enter into an existing market.

Price

The financial expectation, obligation, or contribution made as payment for something.