Use the Following to Answer Questions: Figure: Two SRAS Curves

question 267

Multiple Choice

Use the following to answer questions: Figure: Two SRAS Curves
-(Figure: Two SRAS Curves) The figure shows the AD-AS model with two SRAS curves. If the economy is initially at Point A and expected inflation rate remains unchanged, the economy can achieve a real GDP growth rate of 9% only by:

• A) moving along SRAS₁ to Point B
• B) moving directly to Point C
• C) first moving to Point D and then moving along SRAS₂ to Point C.
• D) first moving to Point C and then to Point B.

---

Definitions:

Relevant Range

The band of normal activity level or volume in which specific cost and revenue relationships hold true.

Mixed Costs

Expenses that have both fixed and variable components, changing in total with the level of activity but not in a directly proportional manner.

Selling and Administrative Expenses

Costs related to the selling of products and the managing of the company, excluding production costs.

Contribution Margin

The amount of revenue remaining after deducting variable costs, contributing towards covering fixed costs and generating profit.