Suppose the Economy Is in Long-Run Equilibrium

question 446

Multiple Choice

Suppose the economy is in long-run equilibrium. In a short span of time, there is a decline in the money supply, a tax increase, a pessimistic revision of expectations about future business conditions, and a rise in the value of the dollar. In the short run, we would expect

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

---

Definitions:

Stethoscope

A medical instrument used for listening to sounds produced within the body, such as the heart and lungs, crucial for diagnosing various conditions.

Abdominal Surgery

A surgical procedure involving the opening of the abdominal cavity to diagnose, treat, or prevent disease in the organs and tissues within.

Chickenpox

A highly contagious viral infection causing an itchy, blister-like rash, fever, and fatigue, mainly affecting children, caused by the varicella-zoster virus.

Vesicles

Small fluid-filled sacs in the skin or mucous membranes, often seen in various skin conditions.