According to Samuelson and Solow, When Aggregate Demand Is Low

question 17

Multiple Choice

According to Samuelson and Solow, when aggregate demand is low, how are unemployment, wages, and prices affected?

• A) Unemployment is high, so there is upward pressure on wages and prices.
• B) Unemployment is high, so there is downward pressure on wages and prices.
• C) Unemployment is low, so there is upward pressure on wages and prices.
• D) Unemployment is low, so there is downward pressure on wages and prices.

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Definitions:

Operating Assets

Assets that are used for the day-to-day operations of a business such as cash, inventory, and machinery.

Residual Income

The amount of income that an individual or company has after subtracting all costs and expenses, including the cost of capital.

Net Operating Income

The income generated from a company's everyday business operations, indicating the profitability from core operations before interest and taxes.

Contribution Margin

The amount by which sales revenue exceeds variable costs of a product, used to cover fixed costs and generate profit.