In the Medium Run, a Price Increase Combined with a Decrease

question 4

Multiple Choice

In the medium run, a price increase combined with a decrease in the unemployment rate is most likely the result of

• A)an adverse supply shock
• B)an adverse supply shock followed by restrictive monetary policy
• C)a favorable supply shock
• D)a decrease in money supply
• E)expansionary fiscal or monetary policy

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Definitions:

Willingness to Pay

The maximum amount an individual is prepared to sacrifice to procure a good or avoid something undesirable.

Profit

The financial gain obtained when the revenue from business activities exceeds the expenses, costs, and taxes needed to sustain the activity.

Perfectly Price Discriminate

A pricing strategy where a seller charges the maximum possible price for each unit consumed that the buyer is willing to pay.

Output

Output refers to the total amount of goods and services produced by a company, industry, or economy within a given period.