Suppose the Economy Is in Long-Run Equilibrium

question 4

Multiple Choice

Suppose the economy is in long-run equilibrium.If there is a sharp increase in the minimum wage as well as an increase in pessimism about future business conditions,then we would expect that in the short run,real GDP will

• A)rise and the price level might rise, fall, or stay the same.In the long run, the price level might rise, fall, or stay the same but real GDP will be unaffected.
• B)fall and the price level might rise, fall, or stay the same.In the long run, the price level might rise, fall, or stay the same but real GDP will be unaffected.
• C)rise and the price level might rise, fall, or stay the same.In the long run, the price level might rise, fall, or stay the same but real GDP will be lower.
• D)fall and the price level might rise, fall, or stay the same.In the long run, the price level might rise, fall, or stay the same but real GDP will be lower.

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Definitions:

Critical Part

A component or element that is considered essential for the successful operation or completion of a system, process, or project.

Contingencies of Power

Factors that affect the ability of one party to influence another, including conditions of dependency, substitutability, and centrality.

Authority

The power or right to give orders, make decisions, and enforce obedience.

Influence

The capacity or power of one party to affect the beliefs, behaviors, or development of others through direct or indirect means.