Suppose the Following Conditions Are Present in the Economy: -

question 144

Multiple Choice

Suppose the following conditions are present in the economy: - firms are facing lower-than normal sales and have reduced output
-there is an excess supply of labour and firms are starting to reduce their workforces
Which of the following statements describes the adjustment that will happen in the AD/AS macro model?

• A)Output is below potential; aggregate demand will fall,causing the AD curve to shift to the left.The price level will fall until equilibrium is restored at .
• B)The economy is in equilibrium at ,but wages are falling.The AS curve will shift to the right until a new equilibrium is reached at a lower price level.
• C)Output is below potential; wages will eventually fall; the AS curve will slowly shift to the right until equilibrium is restored at .
• D)Output is above potential; wages will fall,causing the AS curve to shift to the right until equilibrium is restored at .
• E)Output is above potential; aggregate demand will fall,causing the AD curve to shift to the left until equilibrium is restored at .

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Definitions:

Required Rate

The minimum return an investor expects to achieve when investing in a particular asset, taking into account its risk level.

Annual Cash Flows

Annual cash flows represent the net amount of cash and cash equivalents being transferred into and out of a business in a specific fiscal year, reflecting operational, investing, and financing activities.

Required Rate Of Return

The minimum rate of return an investor expects to receive on an investment, considering the risk level and the opportunity cost of alternative investments.

Annual Cash Flows

The total amount of money being transferred into and out of a business, measured on a yearly basis.