In the Graphs Below, Q_P Refers to the Economy's Potential

question 33

Multiple Choice

In the graphs below, Q_P refers to the economy's potential output level. Refer to the graphs above. In Graph B, assume that the economy is initially in equilibrium at point x₁ but then there is an increase in the price level from P₁ to P₂. This change will lead to:

• A) A movement from x₁ to x₂ in the short run, and the unemployment rate decreases, followed by a shift from x₂ to y₁ as nominal wages rise in the long run
• B) A movement from x₁ to x₃ in the short run, and the unemployment rate decreases, followed by a shift from x₃ to x₁ as output rises in the long run
• C) A movement from x₁ to y₁ in the short run, and back to x₁ in the long run
• D) No change in the short run, but a shift from x₁ to y₁ in the long run

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Definitions:

Boolean Condition

An expression that evaluates to either true or false, used to control the flow of a program.

Compound Boolean

An expression that combines multiple Boolean expressions using logical operators, leading to more complex condition checking.

If-else Statement

A conditional statement in programming that executes a block of code if a specified condition is true and another block if the condition is false.

Compound Statement

A block of statements enclosed within curly braces {} in programming languages, allowing for multiple statements to be treated as a single statement.