As the Macro Economy Adjusts from the Short Run to the Long

question 98

Multiple Choice

As the macro economy adjusts from the short run to the long run,

• A)wages and other factor prices adjust to close output gaps.
• B)potential output is adjusting to close inflationary or recessionary gaps.
• C)wages and other factor prices remain constant.
• D)aggregate demand shocks cause deviations from potential output.
• E)aggregate supply shocks cause deviations from potential output.

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Definitions:

Explicitly Considered

Directly factored into an analysis or decision-making process without assumptions or implications.

Cash Flows

The total amount of money being transferred into and out of a business, particularly in terms of operational activities.

Relative Risk

The level of uncertainty or volatility of an investment in comparison to another investment or to a market benchmark.

Discount Rate

The interest rate charged to commercial banks and other depository institutions for loans received from the Federal Reserve's discount window; also used in discounted cash flow (DCF) analysis to determine present value.