Suppose Increased Costs for Security Raised the Costs of Production

question 62

Essay

Suppose increased costs for security raised the costs of production for all firms.Explain how this would affect aggregate supply, output, and the price level in the short run and the long run.

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Definitions:

Depreciation

The accounting process of allocating the cost of a tangible asset over its useful life, representing the decrease in value of the asset over time.

Section 1231

Refers to a tax provision in the United States that includes the tax treatment of gains and losses on the sale or exchange of real or depreciable property used in a trade or business and held for more than one year.

Ordinary Asset

An asset used in a business or trade which is subject to ordinary income tax rates rather than capital gains tax rates if sold or exchanged.

Trade or Business

Trade or Business refers to any activity carried out for the purpose of earning income or profit, involving dealings in goods or services.