Suppose the Economy Is in Long-Run Equilibrium

question 176

Multiple Choice

Suppose the economy is in long-run equilibrium. If there is a sharp increase in the minimum wage as well as an increase in taxes, then in the short run, real GDP will

• A)rise and the price level might rise, fall, or stay the same.In the long run, the price level might rise, fall, or stay the same but real GDP will be unaffected.
• B)fall and the price level might rise, fall, or stay the same.In the long run, the price level might rise, fall, or stay the same but real GDP will be unaffected.
• C)rise and the price level might rise, fall, or stay the same.In the long run, the price level might rise, fall, or stay the same but real GDP will be lower.
• D)fall and the price level might rise, fall, or stay the same.In the long run, the price level might rise, fall, or stay the same but real GDP will be lower.

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Definitions:

Unconscionable

In contract law, a contract that is grossly unfair or one-sided; one that “shocks the conscience of the court.”

Acceptance

In contract law, the act of agreeing to an offer, thereby creating a binding contract.

Quasi-contract

An obligation imposed by law in the absence of an agreement to prevent unjust enrichment.

Freedom of Contract

The principle that individuals have the liberty to freely enter into agreements and contracts without undue government interference.