An Economy Has Experienced a Rightward Shift of Its Long-Run

question 125

Multiple Choice

An economy has experienced a rightward shift of its long-run aggregate supply curve and is now producing on that new long-run aggregate supply curve.It is reasonable to expect that

• A) the cyclical unemployment rate has fallen.
• B) the cyclical unemployment rate has been unaffected.
• C) the inflation rate has risen.
• D) the price level has risen.
• E) productivity has fallen.

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Definitions:

Expected Rate of Return

The profitability anticipated on an investment over a given period, often expressed as a percentage.

Imitation

The action of using someone or something as a model and replicating their behavior, actions, or processes.

R&D Expenditures

Funds allocated towards research and development activities in order to innovate or improve products or services.

Imitation Problem

The potential for a firm’s rivals to produce a close variation of (imitate) a firm’s new product or process, greatly reducing the originator’s profit from R&D and innovation.