Which of the Following Adjustments Will Most Likely Occur When

question 71

Multiple Choice

Which of the following adjustments will most likely occur when output exceeds the economy's long-run capacity?

• A) Prices will decline, bringing actual output into balance with its potential.
• B) The natural rate of unemployment will increase and, thereby, restore equilibrium.
• C) Higher resource prices and costs will reduce short-run aggregate supply until output falls to the economy's long-run capacity.
• D) Lower interest rates will increase the economy's long-run capacity and restore equilibrium.

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Definitions:

Exclusive Right

A privilege or license granted to an individual or company to be the sole seller or producer of a specific product in a certain market.

Accumulated Depreciation

The total amount of depreciation expense that has been recorded for an asset since its acquisition.

Trade-In Allowance

The amount credited to the buyer by the seller when a buyer trades in an old item towards the purchase of a new item.

Accumulated Depreciation

The cumulative depreciation expense recorded for an asset from the time it was operational, thereby lowering its recorded value in the balance sheet.