We Draw the Long-Run Aggregate Supply Curve as a Vertical

question 290

Multiple Choice

We draw the long-run aggregate supply curve as a vertical line to reflect the fact that

• A) the productive capacity of the economy never changes after full adjustment has occurred.
• B) changes in the price level do not alter the level of long-run real GDP after full adjustment has occurred.
• C) technology and resource endowments do not affect long-run real GDP after full adjustment has occurred.
• D) an accurate depiction of the production possibilities curve is vertical after full adjustment has occurred.

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Definitions:

Allowance Method

An accounting technique used to account for bad debts, which estimates uncollectible accounts receivable and creates a provision for them.

Accounts Receivable

Financial dues from customers to an organization for products or services that have been dispensed but not reimbursed.

Allowance for Doubtful Accounts

A contra asset account used to estimate the portion of a company's receivables that may not be collectible.

Bad Debts Expense

This is an expense reported on the income statement, reflecting the cost of credit sales that a company does not expect to collect.