AD - AS Shocks

question 21

Multiple Choice

AD - AS Shocks
-On the graph above,suppose the economy has moved from point H to point G.If the shock was temporary and inflation expectations are adaptive,the economy will next ________.

• A)return to point H
• B)move to point F
• C)move to a point between points G and H
• D)remain at point G
• E)none of the above

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Definitions:

Fixed Expense

Costs that do not vary with the level of production or sales, such as rent, salaries, and insurance premiums.

Margin of Safety

The difference between actual sales and the break-even point, indicating the risk level of not covering fixed costs.

Break-even Sales

The amount of revenue required to cover all fixed and variable costs, resulting in neither profit nor loss.

Sales Percentage

A metric that shows what portion of a company's total sales is made up of a particular product or service.