Given the Aggregate Demand Curve, What Effects Would an Adverse

question 103

Multiple Choice

Given the aggregate demand curve, what effects would an adverse supply shock have on output and price level?  

• A) Output would increase, and price level would increase. 
• B) Output would increase, and price level would decrease. 
• C) Output would decrease, and price level would decrease. 
• D) Output would decrease, and price level would increase.

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Definitions:

Market Price

The amount for which something can be sold on a given market at a specific point in time.

Cost of Equity

The earnings a firm needs to determine whether an investment satisfies its capital return criteria, commonly utilized in the process of capital budgeting.

Cost of Equity

The return a company is required to generate for its shareholders, often estimated using the Capital Asset Pricing Model (CAPM).

Market Price

The modern-day pricing for buying or selling an asset or service.