When the Price Level Is Below the Level at Which

question 177

Multiple Choice

When the price level is below the level at which the aggregate demand curve crosses the long run aggregate supply curve

• A) there will be no price level change.
• B) there will be pressures that will lead to a shift of either the aggregate demand or the long run aggregate supply curves.
• C) actual real GDP would be less than total planned real expenditures, and the price level will rise.
• D) actual real GDP would exceed total planned real expenditures, and the price level will fall.

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Definitions:

Interest Rate

The amount charged by a lender to a borrower for the use of assets, expressed as a percentage of the principal, typically noted on an annual basis.

Direct Write-off Method

An accounting practice where uncollectible accounts receivables are written off directly against income at the time they are deemed noncollectable.

Allowance Method

An accounting technique used to account for bad debts, which estimates and sets aside a portion of accounts receivable deemed unlikely to be collected.

Uncollectible Receivables

Debts owed to a company that are considered to be uncollectable, indicating that the company does not expect to receive payment due to the debtor's inability to pay.