If a Demand Shock Causes the Economy to Move to a Real

question 115

Multiple Choice

If a demand shock causes the economy to move to a real GDP level that is below its full employment level,then

• A) we refer to this as a positive demand shock.
• B) the economy will remain at this point in the long run.
• C) the AS curve will adjust in the long run until the economy returns to full employment.
• D) the AD curve will move back to its original position in the long run.
• E) the unemployment rate will decline.

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Definitions:

Retained Earnings

The portion of a company's profits that is kept or retained rather than distributed to shareholders as dividends, typically used for reinvestment.

Accounts Closed

This term refers to the process of clearing the balance of temporary accounts at the end of the accounting period and transferring the balances to permanent accounts.

Trial Balance

A bookkeeping report that lists the balances of all ledgers accounts in order to verify that total debits equal total credits.

Financial Statements

Formal records of an entity's financial activities and conditions, including the balance sheet, income statement, and cash flow statement.