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 reduce electricity production.In the short run,we would expect
A)the price level to rise and real GDP to fall.
B)the price level to fall and real GDP to rise.
C)the price level and real GDP both to stay the same.
D)All of the above are possible.

Question

Quizplus · Accepted Answer

All of the above outcomes are possible depending on the magnitudes of the effects of each factor. For example, the increase in the minimum wage may lead to higher production costs and price level increases, while the discovery of oil may lead to increased output and real GDP growth. The influx of immigrants may affect the labor market and potentially impact the price level and output, while the new environmental regulations reducing electricity production could decrease output and result in higher prices. Overall, the short-term effects of these changes are dependent on the specific circumstances and their interactions.

Suppose the Economy Is in Long-Run Equilibrium