If the Economy Is on the Aggregate Supply Curve but to the Right

question 152

Multiple Choice

If the economy is on the aggregate supply curve but to the right of the aggregate demand curve,which of the following will be the first market force to lead the economy toward an equilibrium?

• A) At the current output level,prices will be too low and firms will increase their prices.
• B) At the current price level,output will be too low,inventories will diminish,and firms will increase their production.
• C) At the current output level,prices will be too low and firms will lower their prices.
• D) At the current price level,output will be too high and so prices will drop so that output will drop.
• E) At the current price level,output will be too high,inventories will pile up and firms will cut back on their production.

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Definitions:

Share Price

The current price at which a particular share of stock can be bought or sold.

Oversubscription

A situation in which the demand for a new stock issuance or other securities exceeds the supply being offered.

Best Efforts Offering

A type of securities underwriting where an underwriter agrees to sell as much of the offering as possible but does not guarantee the sale of the entire issue.

Confirmed Offering

A finalized agreement to sell securities, such as stocks or bonds, at a specified price and time, with all terms agreed upon by both the issuer and investors.