Suppose the Full-Employment Level of Real Output (Q)for a Hypothetical

question 139

Multiple Choice

Suppose the full-employment level of real output (Q) for a hypothetical economy is $500 and that the price level (P) initially is 100.Use the following short-run aggregate supply schedules to answer the next question.

-Refer to the information above.In the long run,an increase in the price level from 100 to 125 will:

• A) increase real output from $500 to $560.
• B) decrease real output from $500 to $440.
• C) change the aggregate supply schedule from (a)to (c)and result in an equilibrium level of real output of $560.
• D) change the aggregate supply schedule from (a)to (b)and result in an equilibrium level of real output of $500.

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Definitions:

Increasing Rate

A situation where a numerical value or quantity grows over a period of time, which can refer to things like interest rates or inflation.

Gross Savings

Gross Savings refers to the total amount of savings retained by an economy after all expenses have been met but not including depreciation.

GDP

Gross Domestic Product, the total monetary or market value of all the finished goods and services produced within a country's borders in a specific time period.

Malthusian Theory

A theory proposed by Thomas Malthus suggesting that population growth will outpace agricultural production and lead to widespread poverty and famine.