Consider the Basic AD/AS Model with an Upward- Sloping AS Curve

question 42

Multiple Choice

Consider the basic AD/AS model with an upward- sloping AS curve. A positive aggregate demand shock will cause

• A)the equilibrium point to move rightward along the AS curve.
• B)the unemployment rate to remain constant.
• C)a movement along the AD curve to the right.
• D)a shift to the right in the AS curve.
• E)a decrease in the price level.

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Definitions:

Variable Expenses

Costs that vary in direct proportion to changes in the level of activity or volume of production.

Fixed Expenses

Obligations that remain constant in total regardless of changes in business activity levels, such as lease payments and salaries.

Cost Formula Equation

An equation that determines the total cost based on fixed costs, variable rate per unit of activity, and the level of activity.

High-low Method

A technique used in cost accounting to estimate fixed and variable costs based on the highest and lowest levels of activity.