Suppose the economy is in long-run equilibrium. Concerns about pollution cause the government to significantly restrict the production of electricity. At the same time, the value of the dollar falls. What would we expect to happen in the short run? a. The price level will rise, and real GDP might rise, fall, or stay the same.
b. The price level will fall, and real GDP might rise, fall, or stay the same.
c. Real GDP will rise, and the price level might rise, fall, or stay the same.
d. Real GDP will fall, and the price level might rise, fall, or stay the same.

the price level will rise, and real GDP might rise, fall, or stay the same.

Explanation:

Short run

In microeconomics, it is simply defined as the timeframe when all resource prices (including wages) are constant not changing.

Long run

This is also known as the period of time when all resource prices (including wages) change/is altered or do not remain the same.

Long-run equilibrium can change with constant long run aggregate supply (LRAS) and potential output thereby leading to changes only in the price level and this can cause inflation. Due to the changing LRAS, causing an increase in potential output leading to economic growth or decreasing potential output leading to negative growth.

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