An Adverse Supply Shock Will Shift Short-Run Aggregate Supply

question 131

Multiple Choice

An adverse supply shock will shift short-run aggregate supply

• A)right, making prices rise.
• B)left, making prices rise.
• C)right, making prices fall.
• D)left, making prices fall.

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Definitions:

Break-even Point

The level of production or sales at which total revenues equal total expenses, resulting in neither profit nor loss.

Margin of Safety

The difference between actual or projected sales and the break-even point, indicating the cushion a business has before it incurs a loss.

Operating Leverage

A measure of how sensitive net operating income is to a given percentage change in dollar sales.

Net Operating Income

The income derived from a firm's core business operations, not including taxes and interest expenses.