Use the Following to Answer Questions

question 260

Multiple Choice

Use the following to answer questions:
Figure: An Increase in Aggregate Demand
-(Figure: An Increase in Aggregate Demand) Refer to Figure: An Increase in Aggregate Demand. The short-run equilibrium at Y₂ and P₂:

• A) exerts pressure for nominal wages to fall as workers seek to restore lost purchasing power.
• B) exerts pressure for prices to fall, since real GDP exceeds potential real GDP.
• C) results in a recessionary gap.
• D) results in an inflationary gap.

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Definitions:

Profit Margin Component

A financial metric that measures the amount of net income generated as a percentage of revenue, indicating the efficiency of a company in converting sales into actual profit.

Operating Income

Earnings before interest and taxes (EBIT), representing the profit a company makes from its operations, before non-operating incomes and expenses.

Residual Income

Income that remains after all operating expenses and costs of capital have been subtracted from revenues.

Minimum Return

The lowest acceptable rate of return on an investment, often used to guide financial decisions and risk management strategies.