Which of the Following Is the Least Likely Take Place

question 24

Multiple Choice

Which of the following is the least likely take place if the Fed responds to a negative demand shock by reducing the real interest rate?

• A)IS shifts to the right
• B)output gap returns to zero
• C)inflation returns to its previous rate
• D)MP shifts down

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Definitions:

Total Cost

The sum of all costs incurred by a business in the production of goods or services, including both fixed and variable costs.

Marginal Cost

The additional cost incurred from producing one more unit of a good or service.

Average Total Cost

A firm’s total cost divided by output (the quantity of product produced); equal to average fixed cost plus average variable cost.

Economies of Scale

Cost advantages that a business obtains due to expansion, leading to a reduction in the average cost per unit through increased production.