When Inflation Increases Over the Long Run (Several Years)

question 67

Multiple Choice

When inflation increases over the long run (several years) ,

• A)consumption will increase at a faster rate in real dollars.
• B)interest rates will move up with inflation.
• C)real GDP growth will stabilize at the rate of inflation plus 3% real growth.
• D)the dollar will usually rise relative to currencies of countries where inflation is growing at a slower rate.

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Definitions:

Overhead Rate

The ratio of overhead costs to the base cost, used to allocate overhead to products or services.

Cost of Goods Manufactured

The total production cost of the goods completed and ready for sale, including direct materials, direct labor, and manufacturing overhead.

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to individual units of production based on a specific activity like labor hours or machine hours.

Direct Labour Hours

The total hours of labor directly involved in the production process, used as a base for allocating overhead costs.