When the General Price Level Rises and Firms Decide Not

question 55

Multiple Choice

When the general price level rises and firms decide not to change their prices in the short run,this can be attributed to

• A) menu costs.
• B) legally binding contracts.
• C) inflexible input prices.
• D) money illusion.
• E) a decline in revenues.

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Definitions:

Accounts Receivable

Debts to a company from its customers for products or services already delivered, yet payment is pending.

Administrative Expenses

Costs related to the general operation of a company, such as salaries of executives and office supplies.

Direct Method

A method of allocating service department costs directly to producing departments without any intermediate allocation steps.

Accrued Liabilities

Accrued liabilities are financial obligations that a company has incurred but has not yet paid or recorded in its financial statements.