Figure 7-7 -Refer to Figure 7-7. at Output Level Y_K

question 137

Multiple Choice

Figure 7-7
-Refer to Figure 7-7. At output level Y_K,

• A) potential output is less than actual output.
• B) there is a surplus of real GDP.
• C) the unemployment rate exceeds the natural rate of unemployment.
• D) over time aggregate demand will rise to restore long-run equilibrium.

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Definitions:

Conversion Cost

Combined costs of direct labor and manufacturing overheads incurred to convert raw materials into finished goods.

Work in Process

includes products that are in the production process but are not yet completed.

FIFO Method

An inventory valuation method that assumes the first items placed in inventory are the first sold.

Conversion Costs

The costs incurred in the process of converting raw materials into finished goods, including direct labor and manufacturing overhead expenses.