Figure 7-3 -Refer to Figure 7-3. Suppose That the Economy Is in Economy

question 125

Multiple Choice

Figure 7-3
-Refer to Figure 7-3. Suppose that the economy is in long-run equilibrium at point A. Now suppose the stock market crashes, significantly reducing household wealth. In the short-run,

• A) the nominal wage rate falls.
• B) unemployment is above its natural level.
• C) there will be pressure on prices to rise.
• D) the short-run aggregate supply curve shifts to the left as firms cut production.

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Definitions:

Output Expansion

Output expansion is the increase in the quantity of goods or services produced by an economy or a firm, often as a result of increased demand or improved production efficiency.

Unchanged Resource Prices

A situation where the prices of inputs required for production remain constant over a certain period.

Industry Type

A classification that groups companies based on similar business activities, products, or services.

Increasing Cost Industry

An industry in which costs per unit of output rise as the scale of production increases, often due to resource limitations or increasing input prices.