Long-Run Equilibrium Occurs in the Dynamic Model of Aggregate Demand

question 52

Multiple Choice

Long-run equilibrium occurs in the dynamic model of aggregate demand and aggregate supply when:

• A) dynamic aggregate demand equals dynamic aggregate supply.
• B) there are no shocks and inflation is stable.
• C) the demand shock equals the supply shock.
• D) the nominal interest rate equals the real interest rate.

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Definitions:

Direct Labour

Refers to the wages and salaries of employees who are directly involved in the manufacturing or production process of a company's products.

Direct Materials

The raw materials that can be directly attributed to the production of a product.

Manufacturing Overhead

All production costs other than direct materials and direct labor, including expenses such as maintenance, utilities, and depreciation on manufacturing facilities.

Capital Expenditure Budget

A budget for planning and controlling spending on long-term assets, including buildings, equipment, and technology, intended for future operations.