Figure 8-5 Panel (A) Shows an Economy's Aggregate Production

question 135

Multiple Choice

Figure 8-5 Panel (a) shows an economy's aggregate production function, Panel (b) shows the labor market and Panel (c) shows the economy's long-run aggregate supply curve.
-Refer to Figure 8-5. In the labor market represented in Panel (b) ,
I. the equilibrium real wage equals $40,000.
II. at the equilibrium real wage, 100 million workers are employed.
III. the equilibrium real wage is that which prevails when the economy achieves its natural level of employment.

• A) I only
• B) I and II only
• C) I, II, and III
• D) None of the above; to determine if the labor market is in equilibrium, we need information on the economy's aggregate production function.

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Definitions:

Conventions

Established practices or standards in accounting that guide the preparation and presentation of financial statements.

Materiality Principle

An accounting principle that states financial reports should include all items significant enough to influence the decision-making process of an individual reading the report.

Charging to Expense

The process of recognizing a cost as an expense in the income statement during the period in which it is incurred.

Historical Cost Principle

An accounting principle requiring all financial items to be recorded based upon original cost, without adjusting for inflation or market value.