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.

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