Consider an economy in equilibrium, and assume no change in aggregate demand. An earthquake that destroys many factories across the country would result in a(n):
a. increase in the average price level and a decrease in real GDP.
b. increase in the average price level and no change in real GDP.
c. increase in the average price level and an increase in real GDP.
d. decrease in the average price level and an increase in real GDP.
e. decrease in the average price level and a decrease in real GDP.
a
You might also like to view...
Suppose the inflation rate target is "0" and the long run federal funds target is also "0." If the federal funds rate set using the Taylor rule is 1.5% and inflation rate is 3%, the output gap is ________
A) 1.5% B) 6% C) -6% D) 4.5%
Which of the following decreases aggregate demand and shifts the AD curve leftward?
A) a tax cut B) an increase in quantity of money C) an interest rate hike D) a decrease in potential GDP E) an increase in government expenditures on goods and services