The Figure Given Below Depicts the Long Run Equilibrium in an Economy

question 60

Multiple Choice

The figure given below depicts the long run equilibrium in an economy.
Figure 14.1
In the figure:
AD₁ and AD₂: Aggregate demand curves
AS₁ and AS₂: Aggregate supply curves
-Refer to Figure 14.1. When the economy moves from point B to point C:

• A) both the unemployment rate and the rate of inflation increases.
• B) both the unemployment rate and the rate of inflation declines.
• C) the unemployment rate declines at the cost of higher inflation.
• D) the rate of inflation declines at the cost of a higher unemployment rate.
• E) the rate of inflation declines with no change in the unemployment rate.

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Definitions:

Retained Earnings

The portion of net earnings not paid out as dividends but retained by the company to be reinvested in its core business or to pay debt.

Dividends Payable

Dividends payable are a liability on a company's balance sheet representing the amount of dividends that the company has declared but has not yet paid out to its shareholders.

Dividends Expense

The sum distributed from a portion of a company's earnings to its shareholders; often associated with preference shares.

Common Stock Dividend Distributable

Stockholders’ equity account that accumulates a stock dividend that has been declared but not yet issued and distributed.