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, there is a sharp decline in the stock market. What would we expect to happen in the short run?

Question 25 options:

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.

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

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