-In the Above Figure, If Initial Equilibrium Is at Point

question 146

Multiple Choice

-In the above figure, if initial equilibrium is at point A and there is a fully anticipated increase in aggregate demand from AD₁ to AD₂ due to an anticipated increase in the money supply, then

• A) the economy will move directly from point A to point C without passing through point B.
• B) the economy will move directly from point A to point B, and will remain at point B in the long run.
• C) the price level will shift to P₂ in the short run.
• D) the price level will shift to P₂ in the long run.

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Definitions:

Fixed Cost

Overheads that are not affected by the volume of production or sales, covering rent, employee salaries, and insurance fees.

Ending Inventory

Ending inventory refers to the final value of goods available for sale at the end of an accounting period.

Lawn Chairs

Portable chairs designed for use outdoors, particularly in lawns, gardens, or for leisure activities.

Budgeted Sales

Projected revenues a company expects to generate from its operations in a specific period, used for financial planning and performance evaluation.