Refer to the Graph

question 231

Multiple Choice

Refer to the graph. Assume that the economy was initially in equilibrium at point A. If there is a significant technological innovation in the economy, then according to real-business-cycle theory,
Aggregate

• A) demand will shift, which constitutes the full extent of the volatility.
• B) demand will shift, which causes a corresponding shift in aggregate supply.
• C) supply will shift, which causes a corresponding shift in aggregate demand.
• D) supply will shift, but such shifts are very rare in the real economy.

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Definitions:

Percentage

A way of expressing a number as a fraction of 100, used to compare proportions.

Land

In addition to the part of the earth’s surface not covered by water, this term refers to any and all natural resources (“free gifts of nature”) that are used to produce goods and services. Thus, it includes the oceans, sunshine, coal deposits, forests, the electromagnetic spectrum, and fisheries. Note that land is one of the four economic resources.

User Costs

Expenses incurred by consumers for the use of a good, service, or asset, including maintenance, repair, and operational costs.

Total Cost Line

A graphical representation showing the total cost of producing varying quantities of output.