Suppose That the Economy Is at Long-Run Equilibrium

question 60

Multiple Choice

Suppose that the economy is at long-run equilibrium.If there is a sharp rise in the stock market combined with a significant increase in the minimum wage,then 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.

---

Definitions:

Risk Factors

Elements or conditions that may potentially result in a negative impact on the performance or value of an investment.

APT

Stands for Arbitrage Pricing Theory, a financial model that determines asset prices based on the relationship between expected risk and expected return.

Conditional CAPM

An extension of the Capital Asset Pricing Model (CAPM) that allows for the beta coefficient to change depending on economic conditions or time.

Empirical Returns

Returns on an investment that are based on observed, historical real-world data rather than theoretical or expected outcomes.