Consider the Basic AD/AS Macro Model, Initially in a Long

question 129

Multiple Choice

Consider the basic AD/AS macro model, initially in a long -run equilibrium. A positive AS shock will
The price level and output in the short run. In the long run, the price level will and output
)

• A) decrease; decrease; decrease further; will decrease further
• B) decrease; increase; decrease further; will be restored to potential output
• C) decrease; increase; return to its initial level; will be restored to potential output
• D) increase; increase; decrease; will be restored to potential output
• E) increase; increase; return to its initial level; will be restored to potential output

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Definitions:

Padding

The practice of inflating estimates or financial figures to create a buffer for unexpected costs or to create the appearance of greater value.

Static Budget

A fixed budget that does not change or adjust to variations in business activity levels, often used for control purposes in stable environment operations.

Flexible Budget

A budget that adjusts or flexes with changes in the volume or activity level.

Direct Labor

The wages or salaries paid to employees who are directly involved in producing goods or providing services.