Scenario 14-1 The Economy Is in Long-Run Equilibrium. Suddenly, Due to Improved

question 48

Multiple Choice

Scenario 14-1
The economy is in long-run equilibrium. Suddenly, due to improved international relations and the increased confidence of policymakers, citizens become more optimistic about the future and stay this way for a long time.
-Refer to the Scenario 14-1.Which of the following are predicted by the aggregate demand and aggregate supply theory?

• A)The expected inflation falls. Workers bargain for higher increases in wages.
• B)The expected inflation falls. Workers bargain for lower increases in wages.
• C)The expected inflation rises. Workers bargain for higher increases in wages.
• D)The expected inflation rises. Workers bargain for lower increases in wages.

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Definitions:

Gains From Trade

The benefits obtained by countries or individuals from engaging in international trade, allowing for specialization and more efficient production.

Fewer Resources

A decrease in the availability of inputs required for production or consumption, often leading to increased competition or prices.

Production Possibility Frontier

A graph that shows the highest possible mix of two goods that can be made with the existing resources and technology.

Opportunity Cost

The price paid for not choosing the next most favorable option when making a decision or opting for one alternative over another.