In Long- Run Macroeconomic Equilibrium

question 327

Multiple Choice

In long- run macroeconomic equilibrium,

• A) real GDP equals potential GDP.
• B) real GDP and the price level are determined by short- run aggregate supply and aggregate demand and long- run aggregate supply is irrelevant.
• C) the price level is fixed and aggregate demand determines real GDP.
• D) real GDP is less than potential GDP.

---

Definitions:

Variable Costing

A method of inventory costing that includes only variable production costs—direct materials, direct labor, and variable manufacturing overhead—in product costs, excluding fixed manufacturing overhead.

Per Unit

A term that refers to expressing costs, revenues, or any other financial metric on a per unit of production or per unit of sale basis.

Fixed Manufacturing Overhead

These are production costs that do not change with the level of manufacturing activity, such as rent for factory premises.

Inventories

Assets held for sale in the ordinary course of business, or materials to be used or consumed in the production process.