Suppose We Assume $\bar { a } = 0 , \bar { b } = 1 , R _ { t } = \bar { r } = 5 \%$

question 22

Multiple Choice

Suppose we assume $\bar { a } = 0 , \bar { b } = 1 , R _ { t } = \bar { r } = 5 \%$ , and the real interest rate falls to $R _ { t } ^ { \prime } = 4 \%$ ) In this scenario of the IS curve the economy would, in the short run:

• A) remain at its long-run equilibrium
• B) have reduced output
• C) move from 1 percent below its potential to its long-run equilibrium
• D) move from its long-run equilibrium to 1 percent above its potential
• E) move from its long-run equilibrium to 1 percent below its potential

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Definitions:

Total Fixed Cost

The sum of all costs that do not change with the level of output or sales in the short term, such as rent and salaries.

Activity Bases

Metrics used to allocate costs based on various activities or drivers that cause costs to be incurred.

Food Costs

The total cost incurred by a business to produce the food items it sells.

Units-Of-Production Depreciation

A method of depreciation based on an asset's usage, activity, or units of production rather than the passage of time.