Suppose the Following Conditions Are Present in the Economy: -

question 93

Multiple Choice

Suppose the following conditions are present in the economy: - firms are increasing output to meet rising demand for their goods
- workers are able to demand higher wages as firms try to bid workers away from other firms
Which of the following statements describes the adjustment that will happen in the AD/AS macro model?

• A)There is an inflationary output gap; aggregate demand will continue to increase,causing the AD curve to shift to the right.The price level will rise until equilibrium is restored at .
• B)The economy is in equilibrium at ,but wages are rising.The AS curve will shift to the left until a new equilibrium is reached at a higher price level.
• C)There is a recessionary output gap; wages and other factor prices will rise; the AS curve will shift to the left until equilibrium is restored at .
• D)There is an inflationary output gap; wages and other factor prices will rise; the AS curve will shift to the left until equilibrium is restored at .
• E)There is a recessionary output gap; aggregate demand will rise,causing the AD curve to shift to the right until equilibrium is restored at .

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Definitions:

Limit Competition

A market situation where competitive actions are restricted by factors such as regulations, monopolistic practices, or high barriers to entry.

Control Over Price

Control Over Price refers to a market situation where a seller or group of sellers can influence or set the price of goods and services, often due to limited competition.

Market Power

The ability of a company or entity to influence the price or quantity of goods or services in the market.

Raise Price

The act of increasing the price at which goods or services are sold, often in response to market conditions or increased costs.