Starting from Long-Run Equilibrium, Without Policy Intervention, the Long-Run Impact

question 84

Multiple Choice

Starting from long-run equilibrium, without policy intervention, the long-run impact of a temporary adverse supply shock is that prices will:

• A)be permanently higher, and output will be restored to the natural rate.
• B)return to the old level, and output will be restored to the natural rate.
• C)be permanently higher, and output will be permanently lower.
• D)return to the old level, but output will be permanently lower.

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Definitions:

Authors' Royalties

Authors' royalties are payments made to authors from publishers or producers, based on a percentage of sales of their work.

Fixed Cost

Expenses that do not change with the level of goods or services produced by a business, such as rent, salaries, and insurance.

Debt-to-Total-Assets Ratios

A measure that indicates what proportion of a company's assets is financed through debt.

Equity Ratios

Equity ratios measure a company's financial leverage and are calculated by dividing total equity by total assets.