Suppose the Economy Is in Long-Run Equilibrium

question 112

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, what would we expect to happen in the short run?

• A) Real GDP will rise, and the price level might rise, fall, or stay the same.
• B) Real GDP will fall, and the price level might rise, fall, or stay the same.
• C) The price level will rise, and real GDP might rise, fall, or stay the same.
• D) The price level will fall, and real GDP might rise, fall, or stay the same.

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Definitions:

Norepinephrine

A neurotransmitter and hormone involved in arousal and stress response, also known as noradrenaline.

Serotonin

A neurotransmitter associated with mood regulation, digestion, sleep, and other important bodily functions.

Acetylcholine

A neurotransmitter involved in many functions including muscle contraction and memory.

Upper Brainstem

The part of the brainstem that is closer to the top part of the brain, involved in basic life functions such as consciousness, breathing, and heart rate.