In the Long Run,following a Combination of a Negative Demand

question 26

Multiple Choice

In the long run,following a combination of a negative demand shock and a temporary negative supply shock,

• A)both inflation and output return to the original long-run equilibrium values.
• B)inflation is permanently increased,while output returns to potential output.
• C)output returns to potential output,while inflation may be higher or lower than its initial value.
• D)inflation is permanently reduced,while output returns to potential output.
• E)None of the above.

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Definitions:

Manufacturing Overhead

Indirect production costs that cannot be directly attributed to specific units produced, such as utilities and rent for the production facility.

Cost of Goods Sold

The direct costs attributable to the production of goods sold by a company, including materials, labor, and overhead costs.

Direct Materials

Raw materials that are directly traceable to the production of specific goods or services.

Raw Materials

Basic materials that are used in the manufacturing process to produce goods or finished products.