Suppose the Canadian Economy Is in Long-Run Equilibrium

question 42

Multiple Choice

Suppose the Canadian economy is in long-run equilibrium.Then suppose the value of the Canadian dollar increases.At the same time,people in Canada revise their expectations so that the expected price level falls.What would we expect will happen in the short run?

• A) Real GDP will rise,and the price level might rise,fall,or stay the same.
• B) Real GDP will fall,and the price level might rise,fall,or stay the same.
• C) The price level will rise,and real GDP might rise,fall,or stay the same.
• D) The price level will fall,and real GDP might rise,fall,or stay the same.

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