Suppose the Economy Is in Long-Run Equilibrium at the Level

question 176

Multiple Choice

Suppose the economy is in long-run equilibrium at the level of potential output. What will be the long-run effect of an expansionary monetary policy?

• A) a higher price level
• B) a higher level of real output
• C) both a higher price level and a higher level of real output
• D) a lower price level
• E) a lower level of real output

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Definitions:

Construction Company

A business entity engaged in the building of structures, infrastructure, and other large-scale projects.

Intermediate Good

A product used to produce a final good or finished product.

Gross Domestic Product

The total market value of all final goods and services produced within a country in a given period of time, typically annually.

Inventories

Raw materials, work-in-progress goods, and completely finished products that companies hold to facilitate business operations.