Suppose the Economy Is in Long-Run Equilibrium

question 205

Multiple Choice

Suppose the economy is in long-run equilibrium. In a short span of time, there is an increase in the money supply, a tax decrease, a pessimistic revision of expectations about future business conditions, and a rise in the value of the dollar. In the short run, we would expect

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

---

Definitions:

Seniority

The concept of giving priority or advantages in a workplace based on the length of service or time an individual has been in a position.

Reduced Earnings

A decrease in the net income that a company generates over a defined period compared to past performances.

Flexible Working Hours

Flexible Working Hours refer to work schedules that allow employees some choice in determining when they begin and end their working days, offering adaptability to meet personal needs and improve work-life balance.

Greater Absenteeism

A higher frequency of absence from work or duties, which can be an indicator of dissatisfaction, health issues, or personal problems among employees.