Exhibit 14-7 Aggregate Supply and Demand Curves

question 93

Multiple Choice

Exhibit 14-7 Aggregate supply and demand curves

-In Exhibit 14-7,the aggregate demand and supply curves reflect an economy in which:

• A)full employment is at $1,000 billion GDP.
• B)excess aggregate supply is created when there is a shift from AD₁ to AD₂.
• C)excess aggregate demand forces prices up to P = 120.
• D)excess aggregate demand causes prices to stabilize at P = 110.
• E)a new equilibrium is found at point b.

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Definitions:

Direct Material

Raw materials that can be directly attributed to the production of a specific product.

Processing Costs

Expenses associated with the operation of processing goods, often related to manufacturing or production processes.

Labour Costs

The total expenses borne by employers for the wages, benefits, and taxes associated with their workforce.

Conversion Costs

Costs incurred to convert raw materials into finished products, typically including direct labor and manufacturing overhead.