Within the Framework of the AD/AS Model, When the Current

question 40

Multiple Choice

Within the framework of the AD/AS model, when the current price level in the goods and services market is above the level anticipated at the time decision makers agreed to long-term resource contracts,

• A) producer profits will fall, leading to a reduction in output.
• B) the natural rate of unemployment will rise.
• C) the actual rate of unemployment will fall below the natural rate of unemployment.
• D) output will be temporarily below the economy's long-run sustainable output.

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Definitions:

Quantity Demanded

The cumulative total of a good or service that customers intend and can afford to buy at a set price level.

Quantity Supplied

The total amount of a product that producers are willing and able to sell at a given price in a given time period.

Surplus

An economic situation where the quantity of goods supplied is greater than the quantity demanded.

Shortage

A situation in an economy where the demand for a product or service exceeds the supply available at a specific price.