Suppose that the economy is at long-run equilibrium.If there is a sharp rise in the stock market combined with a significant increase in the minimum wage,then 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.

Question

Quizplus · Accepted Answer

A sharp rise in the stock market increases consumer wealth, boosting aggregate demand, which tends to increase the price level. A significant increase in the minimum wage raises production costs, potentially reducing aggregate supply. The net effect on real GDP is uncertain, but the price level is likely to rise.

Suppose That the Economy Is at Long-Run Equilibrium