Suppose an Economy Is Initially in Long-Run Equilibrium, and It

question 199

Multiple Choice

Suppose an economy is initially in long-run equilibrium, and it then experiences a supply shock in the form of exceptionally high energy prices. Which of these will be true in this economy?

• A) The short-run aggregate supply curve will shift leftward, and the long-run supply curve will shift rightward.
• B) The short-run aggregate supply curve and the long-run aggregate supply curve will shift rightward.
• C) The short-run aggregate supply curve will not shift, and the long-run aggregate supply curve will shift rightward.
• D) The short-run aggregate supply curve will shift rightward, but the long-run aggregate supply curve will not shift.
• E) The short-run aggregate supply curve and the long-run aggregate supply curve will shift leftward.

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Definitions:

Profit Margin

A financial metric indicating the percentage of revenue that exceeds the costs of goods sold, highlighting the profitability of a business or product.

Fair Pricing

The degree to which both businesses and customers believe that the pricing is reasonable.

Reasonable

Based on good sense and sound judgment; fair and sensible.

Skimming

A high pricing strategy, generally used for new products or services that face very little or even no competition.