The Diagram Below Shows an AD/AS Model for a Hypothetical

question 143

Multiple Choice

The diagram below shows an AD/AS model for a hypothetical economy.The economy begins in long-run equilibrium at point A. FIGURE 24-4 Refer to Figure 24-4.The initial effect of the positive AS shock shown in the diagram results in

• A)a recessionary output gap of 250.
• B)a recessionary output gap of 450.
• C)an inflationary output gap of 200.
• D)an inflationary output gap of 300.
• E)an inflationary output gap of 550.

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Definitions:

Production Improvements

Enhancements made to the production process to increase efficiency, reduce costs, or improve product quality.

Days' Payable Outstanding

A financial ratio that calculates the average time it takes for a company to pay its suppliers.

Accounts Payable

Immediate financial obligations a business has, indicating money owed to vendors or lenders for products and services that have been delivered but remain unpaid.

Conversion Costs

The combined costs of direct labor and manufacturing overheads incurred when converting raw materials into finished products.