Consider the Basic AD/AS Macro Model,initially in a Long-Run Equilibrium

question 12

Multiple Choice

Consider the basic AD/AS macro model,initially in a long-run equilibrium.A positive AS shock will ________ the price level and ________ output in the short run.In the long run,the price level will ________ and output ________.

• A)decrease; decrease; decrease further; will decrease further
• B)decrease; increase; decrease further; will be restored to potential output
• C)decrease; increase; return to its initial level; will be restored to potential output
• D)increase; increase; decrease; will be restored to potential output
• E)increase; increase; return to its initial level; will be restored to potential output

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Definitions:

Monopsonistic Employer

An employer who has significant control over the labor market and is the only or dominant buyer of labor, allowing them to influence wages and employment conditions.

MRP

The marginal revenue product, representing the additional revenue generated from employing one more unit of a factor, such as labor or capital.

Labor Supply Curve

A graphical representation showing the relationship between the wage rate and the quantity of labor workers are willing to offer.

Wage Rate

The fixed amount of compensation paid to an employee by an employer in exchange for work performed, typically expressed per hour, day, or piece produced.