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:

Marketable Securities

Financial instruments that can be quickly converted into cash at a known price, such as stocks or bonds.

Optimal Initial Balance

The ideal starting amount of funds that maximizes the effectiveness or efficiency of a financial account or investment strategy.

BAT Model

Stands for the Best Alternative to a Negotiated Agreement; a benchmark used in negotiations to determine each party's alternative options if the current negotiations fail.

Lower Level

Pertains to the subordinate or less complex components within a system, organization, or hierarchy.