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:

Total Surplus

The sum of consumer surplus and producer surplus in a market, representing the total benefits to society from trade.

Mandated Price

A price set by legislation or regulatory authority, not determined by market forces, usually to protect consumers or ensure fair competition.

Surplus Change

A variation in the surplus amount, which can result from changes in market conditions or policies affecting supply and demand.

Sellers' Costs

The total expenses incurred by sellers in providing goods or services, including production, labor, and material costs.