The Aggregate Supply Curve Relating the Price Level to Real

question 74

Multiple Choice

The aggregate supply curve relating the price level to real GDP has three distinguishing segments. Which one of the following indicates the segments?

• A) The horizontal segment reflects increasing pressure on the price level as firms bid for resources. The upward-sloping segment reflects the availability of unused resources. The vertical segment reflects the full employment of all resources.
• B) The horizontal segment reflects the availability of unused resources. The upward-sloping segment reflects the full employment of all resources. The vertical segment reflects increasing pressure on the price level as firms bid for resources.
• C) The horizontal segment reflects the full employment of all resources. The upward-sloping segment reflects increasing pressure on the price level as firms bid for resources. The vertical segment reflects the availability of unused resources.
• D) The horizontal segment reflects the availability of unused resources. The upward-sloping segment reflects increasing pressure on the price level as firms bid for resources. The vertical segment reflects the full employment of all resources.

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Definitions:

Payback Period

The amount of time it takes for an investment to generate an amount of income or cash equivalent to the cost of the investment.

Discount Rate

The interest rate used to determine the present value of future cash flows, guiding investment and financing decisions by reflecting the opportunity cost of capital.

NPV

An abbreviation for Net Present Value, it assesses the worth of future cash flows in today's dollars, subtracting the initial investment.

PI

A mathematical constant representing the ratio of a circle's circumference to its diameter, approximately 3.14159.