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

question 33

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 Financial Crisis.If nominal wages are sticky,which of the following helps explains the change in output?

• A)real wages fall,so firms choose to produce less
• B)real wages fall,so firms choose to produce more
• C)real wages rise,so firms choose to produce less
• D)real wages rise,so firms choose to produce more

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Definitions:

Equilibrium Price

The price at which the number of products that businesses are willing to supply equals the amount of products that consumers are willing to buy at a specific point in time.

Supply

The number of products—goods and services—that businesses are willing to sell at different prices at a specific time.

Demand

The number of goods and services that consumers are willing to buy at different prices at a specific time.

Profits

The financial gain that is realized when the amount of revenue gained from a business activity exceeds the expenses, costs, and taxes involved in sustaining the activity.