Suppose the Economy Is Initially in Long-Run Equilibrium

question 227

Multiple Choice

Suppose the economy is initially in long-run equilibrium. Which of the following best describes the state of the economy after an increase in aggregate demand?

• A)Prices and output are higher.
• B)Prices and output are lower.
• C)Prices are higher and output is the same.
• D)Prices are the same and output is lower.

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Definitions:

Batch Level Activity

Operations or tasks that are performed on groups of products together, typically as a step within the production process, where costs are incurred for the batch as a whole rather than for individual units.

Unit Level Activity

Activities that vary with the number of units produced or sold, directly impacting the cost of goods or services.

Direct Labour-Hours

The total hours worked by employees that can be directly attributed to the production of goods or services.

Overhead Activity

Activities that incur indirect costs, not directly traceable to a product or service but necessary for the production process or service delivery.