The Economy Is in Long-Run Equilibrium

question 130

Multiple Choice

The economy is in long-run equilibrium. Suppose that automatic teller machines become cheaper and more convenient to use, and as a result the demand for money falls. Other things equal, what would we expect will happen to the price level and real GDP in the short and long run?

• A)In the short run, the price level and real GDP would rise, but in the long run they would both be unaffected.
• B)In the short run, the price level and real GDP would rise, but in the long run the price level would rise and real GDP would be unaffected.
• C)In the short run, the price level and real GDP would fall, but in the long run they would both be unaffected.
• D)In the short run, the price level and real GDP would fall, but in the long run the price level would fall and real GDP would be unaffected.

---

Definitions:

Previous Conditioning

The influence of past conditioning experiences on current behavior and learning.

Unconditioned Response

A natural, automatic reaction to a stimulus that occurs without prior learning or conditioning.

Salivation Elicited

The reflexive process of producing saliva in the mouth, often triggered by the anticipation of food, through both psychological and physiological responses.

Unconditioned Stimulus

A stimulus that naturally triggers a response without prior learning or conditioning.