Suppose the Economy Is in Long-Run Equilibrium

question 41

Multiple Choice

Suppose the economy is in long-run equilibrium. In a short span of time, there is a sharp increase in the minimum wage, a major new discovery of oil, a large influx of immigrants, and new environmental regulations that raise the cost of electricity production. In the short run

• A)the price level will rise and real GDP will fall.
• B)the price level will fall and real GDP will rise.
• C)the price level and real GDP will both stay the same.
• D)All of the above are possible.

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Definitions:

Average Collection Period

How long, on average, it takes for a business to get paid by its customers.

Days' Sales In Inventory

A financial measure indicating the average time in days that a company takes to turn its inventory into sales.

Total Current Assets

The sum of all assets that are expected to be converted into cash, sold, or consumed within one year or during the normal operation cycle of the business, whichever is longer.

Receivable Turnover

A financial ratio that measures how efficiently a company collects on its outstanding accounts receivable.