If the Economy Is Initially at Potential GDP and People

question 169

Multiple Choice

If the economy is initially at potential GDP and people correctly anticipate an increase in inflation so that their money wage rate adjusts immediately, then

• A) only real GDP increases with no change in the price level.
• B) only the price level rises with no change in real GDP.
• C) both the price level and real GDP increase.
• D) neither the price level nor real GDP increase.

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Definitions:

Bedsores

Pressure ulcers or injuries that develop on skin and underlying tissue due to prolonged pressure, often seen in individuals who are immobile.

Narcotic Pain Pills

Medications that contain opiate-like substances, used to relieve severe pain but can also be addictive and are carefully regulated.

Risk-prone Health Behavior

Actions that individuals may engage in that increase the risk of developing health problems.

Health-seeking Behaviors

Actions or activities undertaken by individuals aiming to maintain or improve their health status.