Suppose the Economy Is in Long-Run Equilibrium

question 68

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?

• A) In the short run, real GDP will 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) In the short run, real GDP will 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) In the short run, real GDP will 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) In the short run, real GDP will 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.

---

Definitions:

Marshall McLuhan

A Canadian philosopher and communication theorist best known for coining the expression "the medium is the message" and for his studies on media theory.

Media Endorsement

The support or approval of a product, service, or idea by a recognized media outlet, often influencing public opinion and behavior.

Capitalism

An economic system in which trade, industries, and the means of production are largely or entirely privately owned and operated for profit.

Elite Control

The dominance or significant influence exerted by the elite or ruling class in directing the political, economic, or social affairs of a society.