Consider an Economy Which Is in Both Long-Run and Short-Run

question 51

Multiple Choice

Consider an economy which is in both long-run and short-run equilibrium. Which of the following will occur in the short-run if consumer confidence in this economy fell significantly?

• A) The aggregate demand curve will shift to the left.
• B) Firms will increase production as real wages will have fallen.
• C) The short-run aggregate supply curve will move to the right.
• D) The level of inflation in the economy will increase.

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Definitions:

Probability

A measure or estimation of how likely it is that an event will occur, expressed as a number between 0 and 1.

Unfavorable

Describing something that is disadvantageous, negative, or not beneficial; often related to opinions, conditions, or outcomes.

Probability

The chance of an event happening, represented numerically from 0 to 1.

Establishing Probability

The process of determining the likelihood that a given proposition or hypothesis is true.