(a) (b) (c) AS(P100) AS(P125) AS(P75)
P Q P Q P Q
125 $560 125 $500 125 $620
100 500 100 440 100 560
75 440 75 380 75 500
Suppose the full employment level of real output (Q) for a hypothetical economy is $500, the price level (P) initially is 100, and prices and wages are flexible both upward and downward. Refer to the accompanying short-run aggregate supply schedules. In the long run, an increase in the price level from 100 to 125 will
a. increase real output from $500 to $560.
b. decrease real output from $500 to $440.
c. change the aggregate supply schedule from (a) to (c) and result in an equilibrium level of real output of $560.
d. change the aggregate supply schedule from (a) to (b) and result in an equilibrium level of real output of $500.

On january 1, 2018, wetick optometrists leased diagnostic equipment from southern corp. which had purchased the equipment at a cost of $2,256,342. the lease agreement specifies six annual payments of $490,000 beginning january 1, 2018, the beginning of the lease, and at each december 31 thereafter through 2022. the six-year lease term ending december 31, 2023 (a year after the final payment), is equal to the estimated useful life of the equipment. the contract specifies that lease payments for each year will increase on the basis of the increase in the consumer price index for the year just ended. thus, the first payment will be $490,000, and the second and subsequent payments might be different. the cpi at the beginning of the lease is 120. southern routinely acquires diagnostic equipment for lease to other firms. the interest rate in these financing arrangements is 12%. (fv of $1, pv of $1, fva of $1, pva of $1, fvad of $1 and pvad of $1) prepare the appropriate journal entries for wetick and southern to record the lease at its beginning.