Consider the Basic AD/AS Macro Model in Long-Run Equilibrium

question 53

Multiple Choice

Consider the basic AD/AS macro model in long-run equilibrium.A negative AS shock will ________ the price level and ________ output in the short run.In the long run,the price level will ________ and output ________.

• A)decrease; decrease; decrease further; will decrease further
• B)decrease; decrease; decrease further; will be restored to potential output
• C)increase; decrease; decrease; will be restored to potential output
• D)increase; decrease; increase further; will be restored to potential output
• E)increase; increase; increase further; will be restored to potential output

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Definitions:

Economic Profits

The discrepancy between total income and overall expenses, encompassing all direct and indirect costs.

Production Costs

The total expenses incurred in the manufacture of a product, including raw materials, labor, and overhead.

Economic Profits

The surplus left after deducting both explicit and implicit costs from total revenues.

Savings Account

A deposit account held at a bank or other financial institution that provides principal security and a modest interest rate.