Exhibit 10-7 Aggregate Supply and Demand Curves

question 42

Multiple Choice

Exhibit 10-7 Aggregate supply and demand curves

In Exhibit 10-7, if aggregate demand increases from AD₁ to AD₂,

• A) output and prices will increase.
• B) output and prices will decrease.
• C) output alone will increase.
• D) prices alone will increase.

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Definitions:

Retained Earnings

The portion of a company's profits not distributed as dividends but reinvested in the business or kept as reserve.

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year, calculated by dividing current assets by current liabilities.

Permanent Accounts

Balance sheet accounts that carry their ending balances over into the next accounting period, such as assets, liabilities, and equity accounts.

Accumulated Depreciation-Equipment

The total depreciation that has been recorded against a company's equipment since it was put into service.