Use the Following to Answer Questions

question 53

Multiple Choice

Use the following to answer questions .
Exhibit: Aggregate Demand and Aggregate Supply and the Great Depression
-(Exhibit: Aggregate Demand and Aggregate Supply and the Great Depression) During the Great Depression, aggregate demand declined sharply, thrusting the economy into a recessionary gap. Nominal wages plunged roughly 20% between 1929 and 1933. How did the economy respond to the falling wages?

• A) The short-run aggregate supply curve shifted left, from SRAS₂ to SRAS₁, resulting in a short run equilibrium at point k.
• B) The short-run aggregate supply curve shifted right, from SRAS₁ to SRAS₂, resulting in a short run equilibrium at point n.
• C) The short-run aggregate supply curve shifted right, from SRAS₁ to SRAS₂, resulting in a short run equilibrium at point j.
• D) The short-run aggregate supply curve shifted left, from SRAS₂ to SRAS₁, resulting in a short run equilibrium at point m.

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Definitions:

Capital Structure

The mix of a company's long-term debt, specific short-term debt, common equity and preferred equity, constituting how a firm finances its overall operations and growth.

Debt

The total amount of money owed by an individual, firm, or government to lenders, which can include loans, bonds, and other financial obligations.

Capital Structure

The mix of a company's long-term debt and equity that it uses to finance its operations and projects.

MM

Often refers to Modigliani-Miller propositions, theoretical principles in corporate finance regarding capital structure irrelevance in perfect markets.