Author Question: Refer to the above figure. Suppose the original long-run equilibrium was at point B. What could have ... (Read 112 times)

lak · **on:** Jun 30, 2018

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

Question 2

Why is the value added by each producer included in the calculation of GDP instead of his sales revenue?

What will be an ideal response?

bigsis44 · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

A

Answer to Question 2

The revenue or final value of a good includes the value added at each stage of the production process. It is not possible to find out the contribution of each producer in the production process if only the revenue earned by the firm selling the final good is tracked. Therefore, the value added by each producer is included in the calculation of GDP.