Use the Following to Answer Questions

question 23

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 net exports increase. What happens in the long-run, all other things unchanged?

• A) The economy will return to its initial equilibrium at point A.
• B) Equilibrium will be re-established at point B with a higher potential output.
• C) Equilibrium will be re-established at point E at a higher price level.
• D) The aggregate demand curve will shift back to AD₁.

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Definitions:

Parent Entity

A corporation that owns enough voting stock in another corporation to control management and operations by influencing or electing its board of directors.

Non-depreciable Asset

An asset that is not subject to depreciation due to its indefinite useful life or that it maintains its value over time, such as land.

Intragroup Sale

A transaction involving the exchange of goods or services between entities within the same corporate group.

Consolidation Adjustment

Adjustments made to financial statements in the process of combining the financial information of parent and subsidiary entities into a single set of financial statements.