Figure 7-4 -According to the Classical Economists When Aggregate Demand Declines,AD₀ to Aggregate

question 4

Multiple Choice

Figure 7-4

-According to the classical economists when aggregate demand declines,AD₀ to AD₁ in the figure above,and output,falls below the natural rate of unemployment at 3000,wages and prices would

• A)fall to E₁ causing output to rise and unemployment would be temporary.
• B)rise to E₀ causing output to rise and unemployment would be temporary.
• C)rise to A causing output to fall and unemployment would be temporary.
• D)fall to A causing output to fall and unemployment would be permanently increased.

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Definitions:

Net Assets

The residual interest in the assets of an entity after deducting its liabilities, essentially representing the owners' equity.

Balance Sheet Approach

A method of estimating an organization's value based on the assets, liabilities, and equity recorded in its balance sheet.

Allowance for Doubtful Accounts

A contra asset account used to estimate the amount of receivables that may not be collectible.

Accounts Receivable

Due amounts from clients to a company pertaining to goods or services delivered but payment not received.