Suppose the Spending Habits of Consumers Suddenly Change So That

question 33

Essay

Suppose the spending habits of consumers suddenly change so that consumption growth increases. What should the central bank do to restore the economy back to the old equilibrium point? Explain your answer with the aid of a dynamic AS-AD diagram.

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Definitions:

Activity-Based Costing

An accounting method that identifies the activities that a firm performs and then assigns indirect costs to products based on the benefit received from those activities.

Activity-Based Costing

A method of cost accounting that identifies activities in an organization and assigns the cost of each activity to all products and services according to the actual consumption by each.

Product Q1

Designates the first quarter's product or output in a company's fiscal year.

Product Q19S

A designated name or code for a specific product, suggesting a unique item or version offered by a company.