Within the Framework of the AS/AD Model, Which of the Following

question 5

Multiple Choice

Within the framework of the AS/AD model, which of the following is a true statement regarding short-run aggregate supply?

• A) An increase in prices temporarily improves profit margins because important components of costs are fixed in the short run.
• B) An increase in prices leads to higher interest rates, which temporarily improves profit margins.
• C) An increase in prices leads to an expansion in the money supply, which stimulates additional output.
• D) An increase in prices increases real wage rates and thereby expands the size of the economy's resource base.

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Definitions:

Maturity Date

The specified date on which the final payment of a loan, bond, or other financial instrument is due.

Repay

To make payment back to someone from whom money has been borrowed.

Withdraw

To remove or retract something, such as funds from a bank account, or to cease participation in an activity or agreement.

Trade Acceptance

A written instrument, drawn by the seller on the buyer, who accepts it, indicating the buyer’s commitment to pay the seller for goods at a future date.