Refer to the Above Diagram

question 18

Multiple Choice

Refer to the above diagram.Assume that nominal wages initially are set on the basis of the price level P₂ and that the economy initially is operating at its full-employment level of output Q_f.In terms of this diagram, the long-run aggregate supply curve:

• A)is AS₂.
• B)is a vertical line extending from Q_f upward through e, b, and d.
• C)may be either AS₁, AS₂, or AS₃ depending on whether the price level is P₁, P₂, or P₃.
• D)is a horizontal line extending from P₂ rightward through f, b, and g.

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Definitions:

Bad Debts Expense

Represents the amount of receivables a company does not expect to collect and is recorded as an expense.

Merchandise Inventory

The goods a company holds for the purpose of sale to customers in the normal course of business.

Net Realizable Value

The estimated selling price of goods minus the cost of their sale or disposal, reflecting the actual cash value of inventory.

Accounts Receivable

The sum customers owe a corporation for goods or services delivered but not yet compensated.