One Reason the Long-Run Aggregate Supply Curve Has the Slope

question 56

Multiple Choice

One reason the long-run aggregate supply curve has the slope it does is due to the fact that:

• A)if current output equals potential output, the short-run aggregate supply curve is stable.
• B)that inflation is zero in the long run.
• C)over long periods of time the economy moves to its potential level of output with higher inflation.
• D)over long periods of time the economy moves to its potential level of output with lower inflation.

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Definitions:

Average Operating Assets

The average value of the assets used in the operation of a business, taken over a specific period, which may be used to evaluate the effectiveness of asset use in generating revenue.

Return on Investment

A measure of the profitability of an investment, calculated by dividing the net profit by the initial cost of the investment.

Controllable Direct Fixed Costs

Expenses that do not vary with production volume and can be altered or influenced by management in the short term.

Noncontrollable Direct Fixed Costs

Fixed costs that cannot be altered or influenced by the decisions of management in the short term.