Use the Following to Answer Questions

question 160

Multiple Choice

Use the following to answer questions .
Exhibit: Short-run Aggregate Supply
-(Exhibit: Short-run Aggregate Supply) Suppose that the economy is in long-run equilibrium at point A. Now suppose the stock market crashes, significantly reducing household wealth. What happens in the short-run?

• A) Real GDP remains at Y₁ but the price level falls to P₃.
• B) The quantity of real GDP demanded falls resulting in a movement from point A to point F.
• C) Real GDP decreases to Y₃ and the price level falls to P₃.
• D) The economy moves to a short-run equilibrium at point D.

---

Definitions:

Total Cost Method

A method of inventory valuation where the total cost of goods available for sale is allocated to the cost of goods sold and ending inventory.

Invested Assets

Assets that are purchased or acquired for the purpose of generating income or appreciation, including stocks, bonds, real estate, and more.

Contribution Margin

The difference between sales revenue and variable costs, indicating how much revenue is contributing to covering fixed costs and generating profit.

Machine Hours

Machine hours measure the total operation time of machinery within a production process, often used as a basis for allocating overhead costs.