The Figure Below Shows the Short-Run Aggregate Demand and Supply

question 71

Multiple Choice

The figure below shows the short-run aggregate demand and supply curves of an economy. When real GDP is at Y₂, _____.

• A) potential output is greater than actual output.
• B) there is a recessionary gap.
• C) the price level is likely to fall.
• D) the actual unemployment rate is less than the natural rate of unemployment.
• E) aggregate demand is likely to increase to restore equilibrium.

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Definitions:

Flexible Budgets

A financial plan that adjusts to varying levels of operational activity or volume.

Fixed And Variable

Terms describing costs within a business; fixed costs do not change with the volume of production, while variable costs do.

Production Budget

A plan that outlines the number of units that need to be produced to meet sales demands and inventory requirements.

Master Budget

An integrated set of operating and financial budgets for a period of time.