(Figure: Shifts in Aggregate Demand) Starting at Equilibrium Point B

question 284

Multiple Choice

(Figure: Shifts in Aggregate Demand) Starting at equilibrium point b, if imports increase or consumer demand decreases, the demand curve will shift to _____, thus _____ the price level and _____ real output.

• A) AD₁; increasing; decreasing
• B) AD₂; decreasing; decreasing
• C) AD₁; increasing; increasing
• D) AD₂; increasing; decreasing

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Definitions:

Break-Even Level of Sales

The sales amount at which a company's total revenues equal its total expenses, resulting in no net profit or loss.

Variable Production Costs

Costs that fluctuate with the level of production output, including direct materials, direct labor, and variable manufacturing overhead.

Monthly Fixed Cost

Expenses that do not change regardless of the level of production or sales, such as rent or salaries, calculated on a monthly basis.

Operating Leverage

A measure of how sensitive a company's operating income is to a change in sales, indicating the impact of fixed costs on profits.