The Economy's AS Curve Is Often Assumed to Be Relatively

question 13

Multiple Choice

The economy's AS curve is often assumed to be relatively flat at low levels of real GDP. The underlying reasoning is that

• A)at low levels of GDP, firms are faced with unused capacity and thus can increase output without significantly increasing their costs.
• B)profits are normally high in this section of the AS curve, so firms are willing to expand output.
• C)the price level is constant.
• D)consumer demand for most goods tends to be non- responsive to price when output is low.
• E)consumer demand for most goods tends to be very responsive to price when output is low.

---

Definitions:

Selling Price

The amount of money a buyer pays to acquire a product or service from a seller.

Effective Interest Method

A method of calculating the amortized cost of a bond and of allocating interest income over the bond's life, reflecting the constant rate of interest over the period.

Bond Discounts

The divergence between the stated value of a bond and its decreased sale price.

Bond Premiums

The amount by which the market price of a bond exceeds its face value, often due to interest rates falling after the bond issuance.