When the Factors of Production Are Hired to Produce Output

question 18

Multiple Choice

When the factors of production are hired to produce output, _____.

• A) the costliest resources available in the market are usually employed
• B) the level of spending on goods and services will fall
• C) income is generated for households to spend on goods
• D) firms will use the income they earn to buy goods and services

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Definitions:

Natural Rate

A concept referring to the level of unemployment at which inflation is not accelerated, suggesting an equilibrium between demand for labor and supply.

Long-Run Aggregate-Supply

The total quantity of goods and services that producers in an economy are willing and able to supply at a full employment level, regardless of the price level, in the long term.

Long-Run Phillips

Describes the relationship between unemployment and inflation over a longer period, suggesting that in the long run, there is no trade-off between inflation and unemployment.

Natural Rate

The long-term rate of unemployment or economic output at which the economy stabilizes, without causing inflation.