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:

Concessions

Are compromises or allowances made by one side in a negotiation or dispute, often involving some degree of surrender of objectives or claims.

Large States

Large states refer to states with significant geographic area, population, or influence within a country, often having greater representation or power in legislative processes.

Alliances

Formal agreements between two or more nations or parties to cooperate on mutual interests or to defend each other in the event of conflict.

Shays's Rebellion

An armed uprising in Western Massachusetts in 1786-1787, led by Daniel Shays, highlighting the need for a stronger national government which led to the drafting of the U.S. Constitution.