Starting from Short-Run Equilibrium,the Following Occurs: Labor Productivity Rises and Individuals

question 95

Multiple Choice

Starting from short-run equilibrium,the following occurs: labor productivity rises and individuals expect higher (future) incomes.What is the effect on the price level and Real GDP in the short run?

• A) Real GDP falls and the price level necessarily rises.
• B) Real GDP rises and the effect on the price level cannot be determined.
• C) Real GDP rises and the price level necessarily falls.
• D) Real GDP falls and the effect on the price level cannot be determined.
• E) Real GDP rises and the price level necessarily rises.

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Definitions:

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