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    Equilibrium price and equilibrium quantity

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    Suppose the labor force decreases in size due to a large number of people reaching retirement age and subsequently entering retirement. At the same time real interest rates in the economy fall. What will happen in the economy?

    1) Equilibrium price in the economy will rise, equilibrium quantity is ambiguous.

    2) Equilibrium price in the economy will fall, equilibrium quantity is ambiguous.

    3) Equilibrium price in the economy is ambiguous, equilibrium quantity will rise.

    4) Equilibrium price in the economy is ambiguous, equilibrium quantity will fall.

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    Equilibrium price in the economy will rise, equilibrium quantity is ...

    Solution Summary

    The solution determines price and equilibrium quantity.

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