Assuming That the Economy Is Currently in a Long- Run

question 82

Multiple Choice

Assuming that the economy is currently in a long- run equilibrium with real GDP equal to Y^*, a positive AD shock (with no change in the money supply) will eventually result in

• A)a higher price level and GDP at its potential level.
• B)a lower price level and GDP at its potential level.
• C)an ongoing inflation in the economy.
• D)a lower price level and GDP below its potential level.
• E)no change in the price level.

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Definitions:

Carrying Amount

Also known as book value, this represents the value of an asset as recorded in the company's books, accounting for depreciation and amortization.

Face Value

The nominal value or original monetary value printed on a security or currency note.

Bonds Payable

Long-term liabilities representing money a company owes to bondholders, to be repaid at some future date plus interest.

Interest Expense

The cost incurred by an entity for borrowed funds over a period, included on the income statement.