Suppose the Economy Is in Long-Run Equilibrium

question 14

Multiple Choice

Suppose the economy is in long-run equilibrium. In a short span of time, there is a large influx of skilled immigrants, a major new discovery of oil, and a major new technological advance in electricity production. In the short run, we would expect

• A) the price level to rise and real GDP to fall.
• B) the price level to fall and real GDP to rise.
• C) the price level and real GDP both to stay the same.
• D) All of the above are possible.

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Definitions:

Ocean Floor

The bottom surface of the ocean, consisting of various features such as plains, trenches, and ridges.

Seamounts

Underwater mountains formed by volcanic activity, rising from the ocean floor but not reaching the surface.

Smooth

Describes surfaces with an even or flat texture that is free of abrasions or roughness.

Continental Rifting

The process by which a continent stretches and splits along a rift zone, often leading to the formation of new oceanic crust.