Assuming an Economy Starts in Long-Run Equilibrium, If the Aggregate

question 29

Multiple Choice

Assuming an economy starts in long-run equilibrium, if the aggregate demand curve were to shift to the left:

• A) prices in the economy would increase.
• B) output in the economy would increase.
• C) the short-run aggregate supply curve would shift to the left.
• D) the long-run effect would be a lower price level.

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Definitions:

Conversion Costs

Costs incurred in the process of converting raw materials into finished products, typically including labor and overhead expenses.

Weighted-Average Method

A cost accounting method that calculates inventory and the cost of goods sold based on the average cost of all similar items in inventory.

First-In-First-Out (FIFO)

An inventory valuation method where the first items produced or acquired are the first to be sold or used, reflecting the chronological flow of goods.

Weighted-Average Method

An inventory costing method that assigns a weighted average cost to each unit in inventory, used in both periodic and perpetual inventory systems.