Suppose the Following Conditions Are Present in the Economy: -

question 148

Multiple Choice

Suppose the following conditions are present in the economy: - firms are facing lower-than normal sales and have reduced output
-there is an excess supply of labour and firms are starting to reduce their workforces
Which of the following statements describes the adjustment that will happen in the AD/AS macro model?

• A)Output is below potential; aggregate demand will fall,causing the AD curve to shift to the left.The price level will fall until equilibrium is restored at .
• B)The economy is in equilibrium at ,but wages are falling.The AS curve will shift to the right until a new equilibrium is reached at a lower price level.
• C)Output is below potential; wages will eventually fall; the AS curve will slowly shift to the right until equilibrium is restored at .
• D)Output is above potential; wages will fall,causing the AS curve to shift to the right until equilibrium is restored at .
• E)Output is above potential; aggregate demand will fall,causing the AD curve to shift to the left until equilibrium is restored at .

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Definitions:

Common-Size Balance Sheets

Financial statements that present all line items as percentages of a common base figure rather than absolute numerical figures, facilitating comparison.

Financial Structure

The mix of debt and equity that a company uses to finance its operations and growth.

Economics

The social science focused on the production, distribution, and consumption of goods and services.

Historical Cost

The original monetary value of an asset or liability, reflecting its purchase price or value at the time of acquisition, not adjusted for inflation or market changes.