Refer to the Following Graph

question 10

Multiple Choice

Refer to the following graph. The massive increase in defense spending is best represented by the:

• A)AD curve shifting from AD₀ to AD1.
• B)AD curve shifting from AD₁ to AD0.
• C)SAS curve shifting from SAS₀ to SAS1.
• D)SAS curve shifting from SAS₁ to SAS0.

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Definitions:

Rising Prices

A situation where the general level of prices for goods and services in an economy increases over a period of time.

Average Total Cost

The total cost of production divided by the quantity of output, encompassing both fixed and variable costs.

Average Variable Cost

The cost per unit of production that varies with the level of output, calculated by dividing the total variable costs by the number of units produced.

Variable Costs

Expenses that change in proportion to the activity of a business, such as costs for raw materials or production inputs.