Question

The short-run economic outcome resulting from the increase in production costs is known as . Now suppose that the government decides not to take any action in response to the short-run economic impact of the higher oil prices. In the long run, when the government does nothing, the output in the economy will be $ billion and the price level will be:__________.

Answer 1

Answer:

1. Stagflation.

2. $110;$110

Explanation:

Stagflation can be defined as a short-run economic outcome resulting from the increase in production costs.

Supposing the government decides not to take any action in response to the short-run economic impact of the higher oil prices. In the long run, when the government does nothing, the output in the economy will be $110billion and the price level will be $110.

Hence, resulting in an equilibrium price in the economy.