Liquidity Constraints Explain

question 7

Multiple Choice

Liquidity constraints explain

• A)why consumers may spend less than the permanent-income theory predicts as their current income falls
• B)why consumption may increase more than the life-cycle hypothesis predicts when income recovers after a recession
• C)why consumers may sometimes behave in a manner predicted by the simple Keynesian consumption function
• D)all of the above
• E)none of the above

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Definitions:

Job-Order Costing System

An accounting method that assigns costs to specific production batches or jobs, used for customized orders.

Predetermined Overhead Rate

An estimated rate used to apply manufacturing overhead to products or job orders, based on a related activity base such as machine hours or direct labor hours.

Variable Manufacturing Overhead

Costs that vary with the level of production output, such as utilities for machinery, that are associated with the manufacturing process.

Direct Labor-Hours

The measure of the amount of time workers spend directly producing goods or services, important in calculating labor expenses and production efficiency.