Explain the Relationship Between the Intersection of the AD Curve

question 33

Essay

Explain the relationship between the intersection of the AD curve and the IA line and the level of potential GDP.

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Definitions:

Transfer Price

The price at which goods and services are transferred within divisions of the same company, affecting the allocation of revenue and expenses.

Downstream Profits

Downstream profits refer to earnings generated from the later stages of the production process, such as refining, marketing, and distributing products.

Net Marginal Revenue

The additional revenue gained from selling one more unit of a product, after accounting for the marginal cost of producing that unit.

Intermediate Input

Goods or services used in the production process of another good or service which is itself not a final product.