Refer to the Diagram $\mathrm { AS } _ { 2 }$

question 154

Multiple Choice

Refer to the diagram. Assume that nominal wages initially are set based on the price level P₂ and that the economy initially is operating at its full-employment level of output Q_f. In terms of this diagram, the long-run aggregate supply curve

• A) \(\mathrm { AS } _ { 2 }\)
• B) is a vertical line extending from \(Q _ { f }\) upward through e, b, and d.
• C) may be either A \(A S _ { 1 } , A S _ { 2 } , \text { or } A S _ { 3 }\) depending on whether the price level is \(P _ { 1 } , P _ { 2 } \text {, or } P _ { 3 }\)
• D) is a horizontal line extending from \(P _ { 2 }\) rightward through f, b, and g.

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Definitions:

Net Credit Sales

The total revenue from sales made on credit after deducting any returns or allowances, representing the true credit sales figure.

Percentage-of-Sales Basis

A method used in budgeting and planning where certain costs or expenses are based on a fixed percentage of sales.

Accounts Receivable

Money owed to a business by its clients for goods or services that have been delivered but not yet paid for.

Allowance for Doubtful Accounts

A contra-asset account representing the estimated amount of receivables that may not be collected, reducing net accounts receivable to a more realistic value.