As Aggregate Demand Shifts Left Along the Short-Run Aggregate Supply

question 28

Multiple Choice

As aggregate demand shifts left along the short-run aggregate supply curve,

• A)inflation and unemployment are higher.
• B)inflation is higher and unemployment is lower.
• C)unemployment is higher and inflation is lower.
• D)unemployment and inflation are lower.

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Definitions:

Average Total Cost

The per unit cost of production, calculated by dividing the total cost of production by the quantity of output produced.

Normal Profit

The minimum amount of profit needed for a company to remain operational in the long term, often considered as part of fixed costs.

Identical Firms

Companies that produce and sell exactly the same products or services, making them perfect substitutes for one another in a market.

Total Cost

The complete sum of all expenses incurred in the production of goods or services, including both fixed and variable costs.