Imagine Two Economies That Are Identical Except That for a Long

question 126

Multiple Choice

Imagine two economies that are identical except that for a long time,economy A has had a money supply of $500 billion while economy B has had a money supply of $1,000 billion.It follows that

• A)real GDP and the price level are higher in country B.
• B)real GDP, but not the price level, is higher in country B.
• C)the price level, but not real GDP is higher in country B.
• D)neither the price level nor real GDP is higher in country B.

---

Definitions:

Long-Run Equilibrium

A state in which all factors of production and costs are variable, allowing for the adjustment of all inputs, leading to optimal allocation of resources in the market.

Increasing Cost Industry

An industry in which production costs increase as output expands, typically due to factors such as input limitations and increased demand for inputs.

Long-Run Supply Curve

A curve showing the relationship between price and quantity supplied that takes into account all possible adjustments in inputs and outputs.

Constant-cost Industry

An industry where the costs of production do not change as the total output in the industry changes.