Use the Following to Answer Questions

question 53

Multiple Choice

Use the following to answer questions .
Exhibit: Aggregate Demand and Aggregate Supply and the Great Depression
-(Exhibit: Aggregate Demand and Aggregate Supply and the Great Depression) During the Great Depression, aggregate demand declined sharply, thrusting the economy into a recessionary gap. Nominal wages plunged roughly 20% between 1929 and 1933. How did the economy respond to the falling wages?

• A) The short-run aggregate supply curve shifted left, from SRAS₂ to SRAS₁, resulting in a short run equilibrium at point k.
• B) The short-run aggregate supply curve shifted right, from SRAS₁ to SRAS₂, resulting in a short run equilibrium at point n.
• C) The short-run aggregate supply curve shifted right, from SRAS₁ to SRAS₂, resulting in a short run equilibrium at point j.
• D) The short-run aggregate supply curve shifted left, from SRAS₂ to SRAS₁, resulting in a short run equilibrium at point m.

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Definitions:

Manufacturing Overhead

The indirect costs related to manufacturing, not including direct labor or materials, such as utility costs and maintenance expenses.

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead to individual products or job orders, based on a predetermined formula.

Machine-Hours

A measure of the time a machine is run during production, used to allocate manufacturing overhead costs based on machine usage.

Markup

A pricing strategy where a fixed amount or percentage is added to the cost of a product to determine its selling price.