If the Long-Run Equilibrium of an Economy Is Disrupted by an Unexpected

question 55

Multiple Choice

If the long-run equilibrium of an economy is disrupted by an unexpected shift to a more expansionary monetary policy, the policy shift will

• A) reduce aggregate demand and real output in the short run.
• B) lead to a higher rate of unemployment in the short run.
• C) stimulate real output in the short run, but in the long run, its primary impact will be on the general level of prices.
• D) lead to an increase in the general level of prices in the short run, but in the long run, its primary impact will be an expansion in real output.

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Definitions:

Maximize Revenue

Strategies and actions taken by businesses to increase the total income generated from sales, services, or other business activities.

Substitution Effect

A concept in economics where an increase in the price of a good leads to consumers replacing it with a cheaper alternative.

Consumer Behavior

The examination of how individuals, groups, or organizations choose, acquire, consume, and discard products, services, experiences, or ideas in order to fulfill their needs, and how these activities affect both the consumer and the broader community.

Price Skimming Strategy

A pricing approach where a firm charges the highest initial price customers will pay and then lowers it over time.