If the Long-Run Equilibrium of an Economy Is Disrupted by an Unexpected

question 55

Multiple Choice

If the long-run equilibrium of an economy is disrupted by an unexpected shift to a more expansionary monetary policy, the policy shift will

• A) reduce aggregate demand and real output in the short run.
• B) lead to a higher rate of unemployment in the short run.
• C) stimulate real output in the short run, but in the long run, its primary impact will be on the general level of prices.
• D) lead to an increase in the general level of prices in the short run, but in the long run, its primary impact will be an expansion in real output.

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Definitions:

Kilowatt-hour

A unit of energy measurement equivalent to one kilowatt of power expended for one hour of time, commonly used for billing electricity usage.

Straight-line Depreciation

A method of allocating the cost of a tangible asset over its useful life in equal annual amounts, representing the asset’s decrease in value over time.

Factory Equipment

Fixed assets used in manufacturing processes, such as machinery and tools, necessary for producing goods.

Variable Cost

Outlays that are tied to the level of output or sales, including expenditures on materials and labor.