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

question 106

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.In the long run, a fall in the price level from 100 to 75 will:

• A)decrease real output from $500 to $440.
• B)increase real output from $500 to $620.
• C)change the aggregate supply schedule from (a) to (c) and produce an equilibrium level of real output of $500.
• D)change the aggregate supply schedule from (a) to (b) and produce an equilibrium level of real output of $500.

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Definitions:

Economic Development

The process through which a nation improves the economic, political, and social well-being of its people.

Saving and Investment

The act of setting aside income for future use and the use of those savings for purchasing capital goods or financial assets.

Productivity of Labor

The measure of output per worker or per hour worked, indicating how effectively labor inputs are converted into goods or services.

Labor Supply

The total number of people available to work, either already employed or actively looking for work.