If an Economy Operates at a Short-Run Equilibrium Output That

question 163

Multiple Choice

If an economy operates at a short-run equilibrium output that exceeds its long-run capacity, which of the following will be most likely to direct the economy toward full employment?

• A) Improvements in technology will shift the LRAS curve to the right.
• B) Resource prices will increase, causing the SRAS curve to shift to the left.
• C) The unemployment rate will increase, causing the economy's aggregate supply curve to shift to the right.
• D) Interest rates will decline, shifting the aggregate demand curve to the right.

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Definitions:

Accumulated Benefit Obligation

The present value of future retirement benefits earned up to a certain point in time, under a defined benefit pension plan.

Prior Service Cost

Costs recognized when a pension plan initiates or changes, relating to services provided by employees in prior periods.

Net Periodic Pension Expense

The total cost recognized in a particular period related to pension plans, reflecting service cost, interest cost, expected return on plan assets, and other factors.

Unrecognized Past Service Cost

Costs associated with pension plan benefits earned by employees in prior periods not yet reflected in financial statements.