Suppose the economy is in long-run equilibrium. In a short span of time, there is a large influx of skilled immigrants, a major new discovery of oil, and a major new technological advance in 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

The influx of skilled immigrants, discovery of oil, and technological advances increase the economy's productive capacity, leading to a rise in real GDP and a decrease in the price level due to increased supply.

Suppose the Economy Is in Long-Run Equilibrium