The wages, aggregate price level, and GDP in long run equilibrium with the existence of positive supply shock
Answer to Problem 6MCQ
From the available options, the correct option is increase in wages, increase in aggregate price level, and increase in GDP.
Explanation of Solution
In long-run equilibrium, a positive supply shock means there is large demand of goods in the market which shows increase in wages due to low
Therefore, the correct option is b (increase in wages, increase in aggregate price level, and increase in GDP) and other all options are incorrect because if there is decrease in wages then economy in long run equilibrium will not experience positive demand shock because people will demand less due to their low income. And, real GDP would not change only if there is no variations in wage rate and price level in economy.
Introduction: An economy of the country is a system of trade through which wealth is made and used in the country such as consumption and production of goods.
Any unexpected or uncertain event that cause the supply of goods and services in the market which in turn also affect the price of those goods and service is called supply shock.
Chapter 19 Solutions
Krugman's Economics For The Ap® Course
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