Question

Imagine that in 2010, the economy is in long-run equilibrium. Then stock prices rise more than expected and stay high for some time. Refer to Refer to Stock Market Boom-2010. How is the new long-run equilibrium different from the original one?

Answer 1

With this the price level will rise and the real GDP will also rise.

Explanation:

With the increase in the stock prices, the price level of the stocks will definitely increase and a boom in the market will increase the level of the gross domestic product of the country which tells the rate of the country at which it grows.

This leads to the increase in the level of the growth of the country with more development, more opportunities for employment, more utilization of the resources and so on.