If the Economy Is in a Recession

question 29

Multiple Choice

If the economy is in a recession,

• A)It is operating inside the production possibilities curve,and the opportunity cost of deficit spending is zero.
• B)Deficit spending will not increase the size of the debt because interest rates will be falling.
• C)The economy suffers from structural unemployment,which can be alleviated by debt refinancing.
• D)Larger deficits will decrease the national debt.

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Definitions:

Cost-Plus Pricing

A method where the sale price is calculated by adding a particular markup on top of the product's cost per unit.

Variable Manufacturing Cost

Costs that vary directly with the level of production output, including direct materials and direct labor expenses.

Mark-Up Percentage

The percent difference between the cost of a good or service and its selling price, used to calculate the selling price from the cost.

Contribution Margins

The amount remaining from sales revenue after variable expenses are deducted, indicating how much contributes to covering fixed costs and generating profit.