Suppose the Economy Is in Long-Run Equilibrium

question 23

Multiple Choice

Suppose the economy is in long-run equilibrium. If the government increases its expenditures, eventually the increase in aggregate demand causes price expectations to

• A)rise.This rise in price expectations shifts the short-run aggregate supply curve to the right.
• B)rise.This rise in price expectations shifts the short-run aggregate supply curve to the left.
• C)fall.This fall in price expectations shifts the short-run aggregate supply curve to the right.
• D)fall.This fall in price expectations shifts the short-run aggregate supply curve to the left.

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Definitions:

Decrease

A reduction in size, quantity, or intensity of something.

Self-Fulfilling Prophecy

A prediction that directly or indirectly causes itself to become true, due to positive feedback between belief and behavior.

Social Schema

Cognitive frameworks that help individuals quickly process and organize social information based on past experiences, aiding in understanding and predicting social situations.

Stereotyping

The act of categorizing individuals into groups and attributing generalized characteristics to them, often leading to oversimplified beliefs.