Pessimism Suppose the economy is in long-run equilibrium. Then because of corporate scandal, international tensions, and...
Pessimism
Suppose the economy is in long-run equilibrium. Then because of
corporate scandal, international tensions, and loss of confidence
in policymakers, people become pessimistic regarding the future and
retain that level of pessimism for some time.
Refer to Pessimism. In the short run what happens to the price level and real GDP?
Group of answer choices
Both the price level and real GDP fall.
Both the price level and real GDP rise.
The price level rises and real GDP falls.
The price level falls and real GDP rises.
Homework Answers
Correct option A. Both the price level and real GDP fall.
In the case of pessimism among people the confidence of the consumers are reduced and therefore there is a shift in the aggregate demand curve to the left side because of the reduction in consumption and investment ultimately which leads to a decrease in the price level as well as the total output which is the real GDP therefore both the price level and real GDP falls in case of pessimism for sometime in the short run.
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Pessimism
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