Suppose the Economy Is in Long-Run Equilibrium

question 454

Multiple Choice

Suppose the economy is in long-run equilibrium. If there is a sharp decline in the stock market combined with a significant increase in immigration of skilled workers, then in the short run,

• A)real GDP will rise and the price level might rise, fall, or stay the same. In the long-run, real GDP will rise and the price level might rise, fall, or stay the same.
• B)the price level will fall, and real GDP might rise, fall, or stay the same. In the long-run, real GDP and the price level will be unaffected.
• C)the price level will rise, and real GDP might rise, fall, or stay the same. In the long run, real GDP will rise and the price level will fall.
• D)the price level will fall, and real GDP might rise, fall, or stay the same. In the long run, real GDP will rise and the price level will fall.

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Definitions:

Quantity Supplied

The amount of a particular good or service that suppliers are willing and able to provide at a given price during a certain period.

Demand Function

A mathematical expression showing the relationship between the quantity demanded of a good and its price, holding other factors constant.

Supply Function

A numerical model illustrating how the amount of a product provided is related to its cost.

Subsidy

A subsidy is a financial contribution provided by the government or a public body to support businesses, consumers, or sectors, reducing the price of goods or services.