An Economy Is Initially in Long-Run Equilibrium with the Vertical

question 65

Multiple Choice

An economy is initially in long-run equilibrium with the vertical LRAS Y* = 5,000,horizontal SRAS P = 100,and the AD equation P = 200 - 0.02Y.Then the AD shifts rightward to P = 220 - 0.02Y.The new long-run equilibrium price level will be

• A) 120.
• B) 110.
• C) 100.
• D) 130.
• E) 115.

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Definitions:

Incentives

Rewards or stimuli that motivate individuals to perform a certain action or exhibit a desired behavior.

Satisfaction

The fulfillment or gratification of a desire, need, or appetite, or the pleasure derived from this fulfillment.

Motivation

The process that initiates, guides, and maintains goal-oriented behaviors; it is what causes us to act.

Emotion

An immediate, specific, negative or positive response to environmental events or internal thoughts.