Within the AD/AS Model, Which One of the Following Adjustments

question 89

Multiple Choice

Within the AD/AS model, which one of the following adjustments will cause the economy to return to its long-run capacity when output is temporarily greater than the economy's long-run potential?

• A) Lower wage rates and resource prices reduce short-run aggregate supply.
• B) Lower interest rates increase aggregate demand and, thereby, stimulate output.
• C) Higher wage rates and resource prices reduce short-run aggregate supply.
• D) A decrease in prices reduces aggregate demand.

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Definitions:

Fewer Transactions

A situation where a business or an individual engages in a lesser number of financial exchanges or activities within a given period.

Traditional Accounting System

A method of accounting focusing on recording and reporting financial transactions based on historical costs and following generally accepted accounting principles (GAAP).

Push Manufacturing

The traditional approach to manufacturing in which products are manufactured according to a production schedule based on estimated sales; the schedule pushes product into inventory before customer orders are received.

Make to Order

A production strategy where manufacturing starts only after a customer places an order, tailoring products to specific customer requirements.