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

question 42

Multiple Choice

Based on the 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 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'

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Definitions:

Periodic Payment

Regular payments made over a prescribed time frame, often related to loans or annuities.

Ordinary Annuity

An annuity in which payments are made at the end of each period, such as monthly or annually.

Monthly Payment

Monthly payment is the amount paid every month over the term of a loan, lease, mortgage, or other financial agreement.

Personal Financial Planning

The process of managing one's finances by setting goals, assessing resources and liabilities, and devising strategies for achieving financial objectives.