Use the Following to Answer Questions

question 23

Multiple Choice

Use the following to answer questions .
Exhibit: Short-run Aggregate Supply
-(Exhibit: Short-run Aggregate Supply) Suppose that the economy is in long-run equilibrium at point A. Now suppose net exports increase. What happens in the long-run, all other things unchanged?

• A) The economy will return to its initial equilibrium at point A.
• B) Equilibrium will be re-established at point B with a higher potential output.
• C) Equilibrium will be re-established at point E at a higher price level.
• D) The aggregate demand curve will shift back to AD₁.

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Definitions:

Goodwill

An intangible asset that arises when a company acquires another company for a price higher than the fair market value of its net tangible assets.

Impairment Test

An accounting procedure used to determine if an asset's carrying value exceeds its recoverable amount, indicating if the asset is impaired and the loss that needs to be recognized.

Junk Bond Market

A segment of the financial market that deals with high-risk, high-yield bonds issued by corporations with lower credit ratings.

International Mergers

The combination of companies from different countries into a single entity.