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

question 87

Multiple Choice

Consider the basic AD/AS macro model in long-run equilibrium.An expansionary AD shock would have ________ output effect in the short run and ________ output effect in the long run.

• A)a positive; no
• B)a positive; a positive
• C)no; a positive
• D)no; no
• E)not enough information to know

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Definitions:

Manufacturing Overhead Cost

The indirect factory-related costs that are incurred when a product is manufactured, including costs related to maintaining the factory.

Conversion Cost

The sum of direct labor costs and manufacturing overhead expenses involved in converting raw materials to finished products.

Total Variable Cost

The sum of all variable expenses that change in proportion with production output or business activity levels.

Contribution Margin

The amount by which sales revenue exceeds variable costs, indicating how much revenue contributes to fixed costs and profit.