Consider the AD/AS Model After Factor Prices Have Fully Adjusted

question 56

Multiple Choice

Consider the AD/AS model after factor prices have fully adjusted to output gaps.A reduction in the level of potential output,with aggregate demand constant,will

• A)leave real output unaffected and increase the price level.
• B)decrease real output and decrease the price level.
• C)decrease real output and leave the price level unchanged.
• D)decrease real output and increase the price level.
• E)increase real output and decrease the price level.

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Definitions:

Common Stock

A type of equity security that represents ownership in a corporation, providing voting rights, and entitling holders to a share of the company's success through dividends and/or capital appreciation.

Net Increase

The total growth in value or quantity after accounting for all additions and subtractions.

Stock Dividend

A payment to shareholders made in the form of additional shares rather than cash, often used by companies to conserve cash while still providing a dividend.

Operating Cash Inflows

Cash received by a company from its ongoing, regular business activities, such as sales revenue.