Suppose the Economy Is in Long-Run Equilibrium

question 92

Multiple Choice

Suppose the economy is in long-run equilibrium. In a short span of time, there is a sharp increase in the minimum wage. In the short run, what would we expect to happen?

• A) the price level to rise, and real GDP to fall
• B) the price level to fall, and real GDP to remain unchanged
• C) the price level to remain unchanged, and real GDP to fall
• D) the price level to fall, and the real GDP to rise the same

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Definitions:

Fermenting Department

A specialized section within a manufacturing process where biological fermentation of products occurs, such as in beer or pharmaceutical production.

Conversion Costs

The total expenses of direct labor along with manufacturing overhead, which are spent in transforming raw materials into completed goods.

Conversion Costs

The combined costs of direct labor and manufacturing overhead required to transform raw materials into finished products.

First Department

The initial production stage or department in a manufacturing process where raw materials begin their transformation into final products.