Based on the Given Figure, the Economy Is Initially in Long-Run

question 144

Multiple Choice

Based on the given figure, the economy is initially in long-run equilibrium at point A. If there is a favorable supply shock that increases potential output and shifts the long-run aggregate supply curve from LRAS to LRAS', then the new long-run equilibrium is reached at point:

• A)E.
• B)B.
• C)C.
• D)D.

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Definitions:

Contractual Agreement

A legally binding contract that outlines the terms and conditions between parties.

Bond Financing

Raising capital for a business or governmental entity through the issuance of bonds, which are debt securities that must be repaid with interest.

Owner Control

The level of power and authority held by the owner(s) of a business in making significant decisions about its operations.

Lessee

A person or entity that rents or leases property from another, known as the lessor, under the terms of a lease agreement.