-Refer to Figure 15-13

question 183

Multiple Choice

-Refer to Figure 15-13.Beginning at point A,suppose a supply shock shifts the aggregate supply curve to AS₂.In the long run,we would expect

• A) an increase in the price level and a decrease in real GDP
• B) an increase in the price level and a return of real GDP to its full-employment level
• C) a decrease in the price level to below its level at point A,and a return of real GDP to its full-employment level
• D) the price level and real GDP to return to their original levels at point A
• E) aggregate demand to increase until full employment is restored.

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Definitions:

Cash Payback Period

The time it takes for an investment to generate cash flow sufficient to recover its initial cost.

Net Income

The total profit of a company after all expenses, including taxes and operating expenses, have been subtracted from total revenue.

Net Present Value

A method used in capital budgeting to assess the profitability of an investment by calculating the present value of expected cash flows minus the initial investment cost.

Average Rate of Return

A metric used to evaluate the profitability of an investment, calculated by dividing the average annual profit by the initial investment cost.