Question

Optimism imagine that the economy is in long-run equilibrium. then, perhaps because of improved international relations and increased confidence in policy makers, people become more optimistic about the future and stay this way for some time. refer to optimism. in the short run what happens to the price level and real gdp?
a. the price level falls and real gdp rises.
b. the price level rises and real gdp falls.
c. both the price level and real gdp fall.
d. both the price level and real gdp rise.

Answer 1

Under economic conditions where people are optimistic about the stability and equilibrium of the economy, price levels are likely to rise and GDP is likely to rise similarly. Confidence and optimism about future economic stability would allow consumers to buy good with confidence and for growth in price level and growth in real GDP to take place gradually and continually.