Suppose the Economy Is Initially in Long-Run Equilibrium

question 107

Multiple Choice

Suppose the economy is initially in long-run equilibrium.Which of the following events leads to an increase in the price level and a decrease in real GDP in the short run?

• A)a decrease in health insurance premiums paid by firms raises the cost of employing labor
• B)an increase in government transfer payments
• C)an increase in the cost of a key input such as oil
• D)a sharp fall in stock market prices

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Definitions:

Job Search

describes the process individuals undertake to find a new job or employment opportunity.

Matching Workers

The process of aligning the skills and preferences of job-seekers with the needs and demands of employers.

Structural Unemployment

Unemployment resulting from industrial reorganization, typically due to technological change, rather than fluctuations in supply or demand.

Long Spells Of Unemployment

Extended periods in which an individual is actively seeking but unable to find employment.