Consider the AD/AS Model After Factor Prices Have Fully Adjusted

question 83

Multiple Choice

Consider the AD/AS model after factor prices have fully adjusted to output gaps.An increase in the level of potential output,with aggregate demand constant,will

• A)affect only the price level.
• B)decrease real GDP and the price level.
• C)affect only the level of real GDP.
• D)increase real GDP and lower the price level.
• E)decrease real GDP and raise the price level.

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Definitions:

Prematurely Recognize

Recording revenue or expenses in financial statements before the criteria for such recognition are fully met.

IFRS

International Financial Reporting Standards, a set of accounting standards developed by the International Accounting Standards Board (IASB) that is used internationally.

U.S.GAAP

United States Generally Accepted Accounting Principles, which is a framework of accounting standards, principles, and procedures used in the U.S.

Fair Value

An estimate of the market value of an asset or liability based on current market prices or valuations of similar transactions.