In the Long Run,following a Combination of a Negative Demand

question 26

Multiple Choice

In the long run,following a combination of a negative demand shock and a temporary negative supply shock,

• A)both inflation and output return to the original long-run equilibrium values.
• B)inflation is permanently increased,while output returns to potential output.
• C)output returns to potential output,while inflation may be higher or lower than its initial value.
• D)inflation is permanently reduced,while output returns to potential output.
• E)None of the above.

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Definitions:

Operating Environment

The external conditions and factors that affect an organization’s operations, including economic, regulatory, technological, and demographic influences.

Above-average Returns

Financial gains that exceed the benchmark or average returns in a given market or industry.

Excessive Profits

Earnings that significantly exceed the norm for a industry or market, often viewed critically in terms of business ethics or competition fairness.

Equivalent Risk

A concept in finance and investments referring to two or more investment options that have the same level of risk.