In the Given Figure, the Economy Is Initially in Long-Run

question 64

Multiple Choice

In the given figure, the economy is initially in long-run equilibrium at point A. If there is an adverse supply shock that reduces potential output and shifts the long-run aggregate supply curve from LRAS to LRAS', then there is initially ________ gap and the short-run aggregate supply curve will ________.

• A)an expansionary; eventually shift to SRAS'
• B)an expansionary; eventually shift to SRAS"
• C)a recessionary; eventually shift to SRAS"
• D)a recessionary; eventually shift to SRAS'

---

Definitions:

Work in Process

Inventory items that are in the process of being produced but are not yet completed, often referred to as WIP.

Stock Ledger

A record that keeps track of the stock transactions of a company, including shares bought, sold, issued, and returned.

Materials Ledger

A detailed record that tracks the quantity and cost of materials on hand.

Work in Process Account

An account used to record the costs associated with incomplete products in the manufacturing process.