In the Long Run, a Price Shock Results in

question 17

Multiple Choice

In the long run, a price shock results in

• A)an inflation rate greater than the baseline.
• B)an inflation rate the same as the baseline.
• C)an inflation rate lower than the baseline.
• D)a permanent decline in potential GDP.
• E)real GDP being less than potential GDP.

---

Definitions:

Dual Rate

A cost allocation method that separates costs into fixed and variable elements, applying different rates for each in costing calculations.

Single Rate

A method used in cost accounting where a single overhead rate is applied to all units produced, regardless of the department in which they were produced or the resources they consumed.

Fixed Costs

Fixed expenditures that are unaffected by production or sales volumes, encompassing rent, salaries, and insurance.

Variable Costs

Expenses that vary directly with the level of production or sales volume, such as raw materials and direct labor costs.