Beginning from a Position of Long-Run Equilibrium at the Full-Employment

question 116

Multiple Choice

Beginning from a position of long-run equilibrium at the full-employment level of real GDP, the economy's short-run response to an increase in the aggregate demand curve would be:

• A) a movement upward along the short-run aggregate supply curve.
• B) a movement upward along the long-run aggregate supply curve.
• C) a downward shift in the short-run aggregate supply curve.
• D) a shift in both the aggregate demand curve and the short-run aggregate supply c urve with a movement along the long-run aggregate supply curve.

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Definitions:

Gross Earnings

The total amount of income earned by an individual or entity before any deductions or taxes are applied.

Deductions

Amounts subtracted from gross income to reduce taxable income, including expenses, allowances, or certain types of losses.

Payroll Deductions

Amounts subtracted from an employee's gross pay for taxes, insurance, retirement contributions, and other mandatory or voluntary expenses.

Pension Contributions

Funds put into a pension plan by individuals or employers intended to finance retirement benefits.