Suppose the Closed Economy Is in Long-Run Equilibrium

question 56

Multiple Choice

Suppose the closed economy is in long-run equilibrium. Immigration of skilled workers shifts the long-run aggregate supply curve $120 billion to the right. At the same time, government purchases increase by $50 billion. If the MPC equals 0.75 and the crowding-out effect is $80 billion, what would we expect to happen in the long run to real GDP and the price level?

• A)Both real GDP and the price level would be higher.
• B)Both real GDP and the price level would be lower.
• C)Real GDP would be higher, but the price level would be lower.
• D)Real GDP would be higher, but the price level would be the same.

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Definitions:

Qualify Leads

The process of assessing potential sales contacts to determine their likelihood of becoming profitable customers.

Buying Process

A series of steps consumers go through, from recognizing a need or desire to the final purchase and post-purchase evaluation.

Follow-up

A process of making additional contact after an initial meeting or communication to ensure ongoing engagement or to further a goal.

Presentation

A visual or verbal project designed to communicate information, ideas, or data effectively to an audience.