Suppose the Economy Is in Long-Run Equilibrium

question 19

Multiple Choice

Suppose the economy is in long-run equilibrium.Concerns about pollution cause the government to significantly restrict the production of electricity.At the same time,taxes fall.In the short-run

• A)real GDP will rise,and the price level might rise,fall,or stay the same.
• B)real GDP will fall,and the price level might rise,fall,or stay the same.
• C)the price level will rise,and real GDP might rise,fall,or stay the same.
• D)the price level will fall,and real GDP might rise,fall,or stay the same.

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Definitions:

Collateral

Assets that a borrower offers to a lender as security for a loan, which can be seized if the loan is not repaid according to the agreed upon terms.

Cash Flows

The full extent of money transactions processed by a business, considerably affecting its ability to liquidate assets.

Financial Assets

Assets that derive value because of a contractual claim, such as stocks, bonds, bank deposits, and other investments.

Future Cash Flows

The projected income and expenditures that a company expects to generate over a forthcoming period.