A Demand Shock That Increases Real GDP Above Its Full-Employment

question 174

Multiple Choice

A demand shock that increases real GDP above its full-employment level will,in the long run,

• A) lead to a higher wage rate and an upward shift of the aggregate supply curve
• B) lead to a lower wage rate and a downward shift of the aggregate supply curve
• C) lead to a higher wage rate and a rightward shift of the aggregate demand curve
• D) lead to a lower wage rate and a leftward shift of the aggregate demand curve
• E) cause no further shifts in the aggregate supply or aggregate demand curve

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Definitions:

Annual Amortization

The process of spreading the cost of an intangible asset over its useful life on a yearly basis.

Retained Earnings

The portion of net income left over for the business after it has paid out dividends to its shareholders, often reinvested in the business.

Partial Equity Method

An accounting practice used for recording investments, where only part of the investment income is recorded in proportion to ownership, distinct from the full equity method.

Net Income

The total revenue minus expenses, taxes, and costs, representing the profit of a business over a period of time.