Suppose the Economy Is in Long-Run Equilibrium

question 220

Multiple Choice

Suppose the economy is in long-run equilibrium. If there is a tax cut at the same time that major new sources of oil are discovered in the country, what would we expect will happen in the short run?

• A) Real GDP will rise, and the price level might rise, fall, or stay the same.
• B) Real GDP will fall, and the price level might rise, fall, or stay the same.
• C) The price level will rise, and real GDP might rise, fall, or stay the same.
• D) The price level will fall, and real GDP might rise, fall, or stay the same.

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Definitions:

Revenues Test

A criterion used to assess whether revenues are being recognized in the correct accounting period under the accrual basis of accounting.

Operating Segment

A component of a business that engages in business activities earning revenues and incurring expenses, whose operating results are regularly reviewed by the organization's chief operating decision maker.

Separate Disclosures

Financial reporting that requires specific financial statements or items to be presented separately to provide clarity and detail.

Total Revenues

The sum of money received from selling goods or services which are the main activities of a business.