The Three Figures Below Show the Phases of a Disinflation

question 63

Multiple Choice

The three figures below show the phases of a disinflation.In part (i) ,the economy is experiencing a sustained inflation at E₁. FIGURE 29-4 Refer to Figure 29-4,part (iii) .The movement of the economy from E₃ to E₄ in Phase 3 is often caused by

• A)workers accepting a reduction in their wages.
• B)an increase in the productivity of workers.
• C)the Bank of Canada implementing an expansionary monetary policy.
• D)an increase in the unemployment rate.
• E)inflationary expectations that cause wages to continue rising.

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Definitions:

Conversion Costs

Costs incurred to convert raw materials into finished products, usually comprising direct labor and manufacturing overhead.

Total Materials Costs

The total expense incurred for materials used in the production of goods, including direct and indirect materials.

Equivalent Units

A concept in costing that converts partially completed goods into a number of completed units, facilitating cost calculation.

Conversion Costs

Costs that are incurred to convert raw materials into finished goods, typically including direct labor and manufacturing overhead.