Refer to the Above Figure

question 268

Multiple Choice

Refer to the above figure. Suppose the original long-run equilibrium was at point B. What could have caused the move to the current equilibrium?

• A) Decreases in the price level caused short-run aggregate supply to fall.
• B) Input prices must have increased, causing long-run aggregate supply to increase.
• C) Aggregate demand must have decreased.
• D) A temporary reduction in production due to bad weather.

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Definitions:

Investment

The allocation of resources, such as capital, time, or effort, in hope of generating a gain or profit in the future.

Fat Tails

Refers to the occurrences of extreme movements in stock prices or higher than normal risks in investments, which lead to heavy tails in a probability distribution.

Kurtosis

Measure of the fatness of the tails of a probability distribution. Indicates probability of observing extreme high or low values.

Skewness

A measure of the asymmetry of the probability distribution of a real-valued random variable about its mean.