Suppose the Economy Is in Long-Run Equilibrium

question 23

Multiple Choice

Suppose the economy is in long-run equilibrium. If the government increases its expenditures, eventually the increase in aggregate demand causes price expectations to

• A)rise.This rise in price expectations shifts the short-run aggregate supply curve to the right.
• B)rise.This rise in price expectations shifts the short-run aggregate supply curve to the left.
• C)fall.This fall in price expectations shifts the short-run aggregate supply curve to the right.
• D)fall.This fall in price expectations shifts the short-run aggregate supply curve to the left.

---

Definitions:

Secondary Market

Sales of existing securities between investors. Compare with Primary market.

Stock

An ownership share in a corporation, representing a claim on part of the company's assets and earnings.

Transaction

An instance of buying or selling something; a business deal or financial arrangement between two parties.

Short-Term Debt Securities

Financial instruments that represent borrowed money which must be repaid within a short period, typically less than one year.