Suppose the Economy Is in Long-Run Equilibrium

question 176

Multiple Choice

Suppose the economy is in long-run equilibrium. If there is a sharp increase in the minimum wage as well as an increase in taxes, then in the short run, real GDP will

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

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Definitions:

Conscious Rational Way

A mode of thinking and decision-making where individuals deliberately use reason and logic, being aware of their thought processes.

Forces That Motivate

The various internal and external factors that compel individuals to take action or behave in a certain manner.

Allport

Gordon Allport, an influential psychologist known for his theory of personality and the study of the individual.

Unconscious

A section of the mind that remains hidden from conscious perception but still impacts both behaviors and emotional responses.