Use the Following to Answer Questions

question 231

Multiple Choice

Use the following to answer questions :
Figure: Output Gap
-(Figure: Output Gap) Look at the figure Output Gap. If the economy is at Y₁ as a result of expansionary monetary policy and no further policy is implemented, in the long run nominal wages will _____ and shift the short-run aggregate supply curve to the _____, which will _____ real output.

• A)increase; left; decrease
• B)increase; right; increase
• C)decrease; left; decrease
• D)decrease; right; increase

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Definitions:

Economic Profit

The difference between total revenue and total costs, including both explicit and opportunity costs, reflecting the additional gain or loss from a business decision.

Average Total Cost

The cost of producing each unit, calculated by dividing the overall production cost by the quantity of units made.

Marginal Cost

The extra expense that arises when one more unit of a product or service is produced.

Diminishing Returns

A principle in economics where each additional unit of input yields less and less extra output.