Suppose the economy is in long-run equilibrium when the price of oil rises. Which one of the following is not a short-run effect of this situation?
A)an increase in real GDP above long-run real GDP
B)an increase in the price level
C)a decrease in real GDP
D)an increase in unemployment
E)a decrease in consumer spending

Question

Quizplus · Accepted Answer

In the short run, an increase in the price of oil will lead to an increase in the cost of production for firms, leading to higher prices for consumers (B) and potentially reducing real GDP (C). Increased costs may also lead to firms reducing employment (D) and reducing consumer spending (E). However, it is unlikely that this situation would result in an increase in real GDP above long-run real GDP (A).

Suppose the Economy Is in Long-Run Equilibrium When the Price