Suppose the Full-Employment Level of Real Output (Q) for a Hypothetical

question 160

Multiple Choice

Suppose the full-employment level of real output (Q) for a hypothetical economy is $500 and that the price level (P) initially is 100.Use the following short-run aggregate supply schedules to answer the next question. Refer to the information above.If the price level unexpectedly declines from 100 to 75, the level of real output in the short run will:

• A)rise from $500 to $560.
• B)fall from $500 to $440.
• C)fall from $560 to $500.
• D)rise from $440 to $500.

---

Definitions:

Price Supports

Government interventions to maintain the market price of a commodity at a certain level by purchasing excess supply, providing subsidies, or imposing import restrictions.

Subsidies

Financial aid provided by the government to support a specific economic activity or sector.

Supply Of Farm Products

The total quantity of agricultural goods that producers are willing and able to sell at various prices during a certain time period.

Demand

The total amount of goods and services that consumers are willing and able to purchase at various price levels, at a given moment in time.