| Suppose many businesses in Texas feel a need to replace or upgrade their equipment. |
| 10.1. | In the short run (compared to the original long run equilibrium), the Texas economy will experience a |
| | | A. CPI increase and GDP decrease. | | | B. CPI decrease and GDP staying the same. | | | C. CPI staying the same and GDP increase. | | | D. CPI staying the same and GDP decrease. | | | E. CPI staying the same and GDP staying the same. | | | F. CPI decrease and GDP increase. | | | G. CPI increase and GDP increase. | | | H. CPI increase and GDP staying the same. | | | I. CPI decrease and GDP decrease. | |
| 10.2. | In the long run (compared to the original long run equilibrium), the Texas economy will experience a |
| | A. CPI staying the same and GDP staying the same. |
| | B. CPI staying the same and GDP decrease. |
| | C. CPI increase and GDP staying the same. |
| | D. CPI increase and GDP decrease. |
| | E. CPI increase and GDP increase. |
| | F. CPI decrease and GDP staying the same. |
| | G. CPI staying the same and GDP increase. |
| | H. CPI decrease and GDP increase. |
| | I. CPI decrease and GDP decrease. |
| Suppose many businesses in Texas feel a need to replace or upgrade their equipment. |
a) In the short run, when the firms feel they need to upgrade their machinery the economy will experience an increase in the CPI and the GDP will decrease because increased price of goods and services will decrease the purchasing power of consumers.
The answer is \"A\", CPI increase and GDP decrease.
b) IN the long run, the CPI will fall and GDP will increase. IN h long run all the factors are variable so it can be changed and CPI can be controlled. GDP depends on the real factors and it will increase. The answer is \"H\".
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