-Refer to the Above Figure

question 222

Multiple Choice

-Refer to the above figure. Unexpected contractionary monetary policy has caused the aggregate demand curve to shift to AD₂. In the long run

• A)the unemployment rate will be the same rate as before the contractionary monetary policy.
• B)the unemployment rate will be larger than the rate before the expansionary monetary policy.
• C)the unemployment rate will be smaller than the rate before the expansionary monetary policy.
• D)the unemployment rate can increase or decrease depending upon how much the LRAS will shift.

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Definitions:

Variable Cost

Costs that vary directly with the level of production or service provision, such as materials and labor.

Break-Even Analysis

A financial calculation to determine the sales volume at which total revenues equal total costs, resulting in no profit or loss.

Fixed Costs

Expenses that do not vary with the level of production or sales, such as rent or salaries.

Variable Cost

Expenses that vary proportionally with the level of production or service output, such as materials or labor costs.