Suppose the economy is in long-run equilibrium. If there is a sharp increase in the minimum wage. However, a newly formed progressive party and its policies have Canadians being optimistic above the future.Also, experts believes that the new wave of optimism more than compensate for the minimum wage increase, what would we expect to happen in the short run and long run, all things being equal?

Question 32 options:

Neither the price levelnor the real GDP will change in both short run and long run.

Real GDP will rise, and the price level willrise in the short run, real GDP will stay the same and price level will rise further in the long run.

Real GDP will fall, and the price level might rise, fall, or stay the same in both the short run and long run.

The price level will rise, and real GDP might rise, fall, or stay the same in the short run, real GDP will stay the same and price level will rise further in the long run.