In the Extended Aggregate Demand-Aggregate Supply Model

question 260

Multiple Choice

In the extended aggregate demand-aggregate supply model,

• A) long-run equilibrium occurs wherever the aggregate demand curve intersects the short-run aggregate supply curve.
• B) the long-run aggregate supply curve is horizontal.
• C) the price level is the same regardless of the location of the aggregate demand curve.
• D) long-run equilibrium occurs at the intersection of the aggregate demand curve, the short- run aggregate supply curve, and the long-run aggregate supply curve.

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Definitions:

Comparative Advantage

The ability of an individual, firm, or country to produce a certain good or service at a lower opportunity cost than competitors.

International Specialization

The economic strategy where countries focus on the production and export of goods and services for which they have a comparative advantage.

Trading Possibilities Line

A line that shows the different combinations of two products that an economy is able to obtain (consume) when it specializes in the production of one product and trades (exports) it to obtain the other product.

Cost Ratios

These ratios compare different types of costs to each other or to sales in order to evaluate a company's financial efficiency and profitability.