The U.S. economy is at full employment when the following events occur: 1. A deep recession hits
Question:
The U.S. economy is at full employment when the following events occur:
1. A deep recession hits the world economy.
2. The world oil price rises by a large amount.
3. U.S. businesses expect future profits to fall.
Explain the combined effect of these events on the U.S. real GDP and price level.
Question content area bottom
Part 1
A. All three events decrease real GDP. Events 1 and 3 raise the price level and Event 2 lowers the price level, so we can't tell whether the price level rises or falls.
B. All three events decrease real GDP. Events 1 and 3 lower the price level and Event 2 raises the price level, so we can't tell whether the price level rises or falls.
C. Events 1 and 3 decrease real GDP and Event 2 increases real GDP, so we can't tell whether real GDP increases or decreases. Events 1 and 3 lower the price level and Event 2 raises the price level, so we can't tell whether the price level rises or falls.
D. Events 1 and 3 decrease real GDP and Event 2 increases real GDP, so we can't tell whether real GDP increases or decreases. All three events lower the price level.
E. All three events increase real GDP. Events 1 and 3 raise the price level and Event 2 lowers the price level, so we can't tell whether the price level rises or falls.
Elementary Statistics
ISBN: 978-0538733502
11th edition
Authors: Robert R. Johnson, Patricia J. Kuby