Consider the AD/AS Model

question 65

Multiple Choice

Consider the AD/AS model.In the long run,after factor prices have fully adjusted to any output gaps,real GDP

• A)and the price level are determined by aggregate demand.
• B)and the price level are determined by "long-run aggregate supply."
• C)is determined by aggregate demand and the price level by potential output.
• D)is determined by potential output and the price level by aggregate demand.
• E)is determined by AD and the price level is determined by the AS curve.

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Definitions:

Direct Materials

Raw materials that can be directly traced to the production process of a good or service, constituting a significant part of the total cost of production.

Weighted Average Method

A method for calculating the cost of goods sold and the final inventory value by using the average cost of all items available for sale during the accounting period, weighted by quantity.

Total Equivalent Units

A calculation used in process costing to convert partial units of production into full units for easier cost assignment.

Conversion Costs

Costs incurred in the process of converting raw materials into finished goods, typically including labor and overhead expenses.