The Mathematical Equation: Quantity of Output Supplied = Natural Rate

question 59

Multiple Choice

The mathematical equation: quantity of output supplied = natural rate of output + a(actual price level - expected price level) ,expresses

• A)how the long run equilibrium adjusts to changes in money supply.
• B)how output deviates in the short run from its long run natural rate.
• C)how the short run aggregate supply curve shifts.
• D)how adverse shifts in aggregate supply can cause stagflation.

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Definitions:

Note Duration

The total length of time until a note payable or receivable matures and is to be repaid or collected.

Rate of Interest

The percentage of principal charged by the lender for the use of its money.

Principal Amount

The initial size of a loan or an investment, excluding any interest or profit that has been added over time.

Fair Value

The price that would be received for selling an asset or paying off a liability, often the market price for an equity or debt security.