Suppose the Economy Is in Long-Run Equilibrium

question 446

Multiple Choice

Suppose the economy is in long-run equilibrium. In a short span of time, there is a decline in the money supply, a tax increase, a pessimistic revision of expectations about future business conditions, and a rise in the value of the dollar. In the short run, we would expect

• A)the price level and real GDP both to rise.
• B)the price level and real GDP both to fall.
• C)the price level and real GDP both to stay the same.
• D)All of the above are possible.

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Definitions:

Chief Cells

Cells located in the stomach lining that secrete pepsinogen, an inactive precursor of the enzyme pepsin involved in protein digestion.

Parathyroid Gland

Small glands located behind the thyroid gland that regulate calcium levels in the blood through the secretion of parathyroid hormone.

Cortisol

Cortisol is a steroid hormone produced by the adrenal glands involved in the body's stress response as well as in metabolism, immune response, and regulation of inflammation.

Adrenal Gland

A pair of small glands located on top of each kidney that produce a variety of hormones including adrenaline and steroids.