-Suppose the Economy Is Initially Operating at Point a in the Above

question 35

Multiple Choice

-Suppose the economy is initially operating at point A in the above figure. Which of the following statements is true?

• A) An unexpected reduction in aggregate demand will cause the economy to move from point A to point B in the long run.
• B) An unexpected reduction in aggregate demand will cause the economy to move from point A to point B in the short run.
• C) An unexpected reduction in aggregate demand will cause the economy to move from point A to point C in the short run.
• D) none of the above

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Definitions:

Actual Output

The actual total value of goods and services produced by an economy over a specific period.

Potential Output

Potential output refers to the maximum amount of goods and services an economy can produce when it uses its resources fully and efficiently, without prompting inflation.

Cash Conversion Cycle

A metric that expresses the duration (in days) it takes for a company to convert its investments in inventory and other resources into cash flows from sales.

DSO

Days Sales Outstanding, a measure of the average number of days that a company takes to collect revenue after a sale has been made.