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

question 76

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,a fall in the price level from 100 to 75 will:

• A) decrease real output from $500 to $440.
• B) increase real output from $500 to $620.
• C) change the aggregate supply schedule from (a)to (c)and produce an equilibrium level of real output of $500.
• D) change the aggregate supply schedule from (a)to (b)and produce an equilibrium level of real output of $500.

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Definitions:

Unit Elastic

Describes a situation where the change in quantity demanded or supplied is exactly proportional to the change in price.

Midpoint Method

A method employed in economics for determining demand or supply elasticity through calculating the mean of the initial and final prices and quantities.

Price Elasticity

A measure of how much the quantity demanded or supplied of a good or service changes in response to a change in its price.

Strategic Leader

A person who guides an organization towards long-term goals by making visionary decisions and inspiring others.